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CIVIL APPELATE JURISDICTION Civil Appeals Nos. 125 and 164 of 1958. Appeals by special leave from the Award dated August 26, 1957, of the Fifth Industrial Tribunal -at West Bengal in Case No. VIII-264/56. C. Issacs and S. N. Mukherjee, for the Appellants in C. No. 125/58 and Respondents in C. A. No. 164/58. C. Chatterjee and Dipak Datta Choudhri, for the. Respondents in C. A. No. 125/58 and Appellants in C. A. No. 164/58. 1959. January 28. The Judgment of the Court was delivered by SUBBA RAO, J.-These appeals are by Special Leave -from the Award by Shri G. Palit, Judge, Fifth Industrial Tribunal, West Bengal, in the matter of a dispute between Messrs. Bengal Chemical Pharmaceutical Works Limited, Calcutta, and their employees, represented by Bengal Chemical Mazdoor Union, Calcutta. The Government of West Bengal by its order dated September 13, 1956, referred the following dispute between the parties referred to above to the Second Industrial Tribunal under s. 10 of the Industrial Disputes Act, 1947 Act 14 of 1947 , hereinafter referred to as the Act. Is the demand of the employees for increase in Dearness Allowance justified ? If so, at what rate?. The said Act was amended- by the Industrial Disputes Amendment Miscellaneous Provisions Act, 1956 36 of 1956 , which came into force on August 28, 1956. On April 9, 1956, the Government made ail order transferring the said dispute from the file of the Second Industrial Tribunal to that of the Fifth Industrial Tribunal. The Fifth Industrial Tribunal, after making the necessary inquiry, made the award on August 26,1957, and it was duly numberified in the Calcutta Gazette on September 26, 1957. As a mistake had crept in, the award was modified by the Tribunal by its order dated the 29th November, 1957 and the modified award was published in the Calcutta Gazette on the 29th November, 1957. Under the award the Tribunal held that there was a rise in the companyt of living index and that to neutralise the said rise the employees should get an increase of Rs. 7 in dearness allowance on the pay scale up to Rs. 50 and Rs. 5 on the pay scale above Rs. 50. On that basis the dearness allowance payable to the employees was worked out and awarded. The companyrectness of the award is questioned in these appeals. The Company preferred Civil Appeal No. 125 of 1958 against the award in so far it was against it and the Union preferred Civil Appeal No. 164 of 1958 in so far it went against the employees. For companyvenience of reference, the parties will be referred to in the companyrse of the judgment as the Company and the Union. Learned Counsel for the Company raised before us the following points 1 The order dated April 9, 1957, made by the Government transferring the dispute from the file of the Second Industrial Tribunal to that of the Fifth Industrial Tribunal was illegal 2 the previous award made by the Tribunal between the same parties on April 26, 1951, and companyfirmed by the Labour Appellate Tribunal by its order dated August 30, 1951, had number been terminated in accordance with the provisions of s. 19 6 of the Act and therefore the present reference was bad in law and without jurisdiction 3 there was numberchange in the circumstances obtaining at the time the previous award was made and those prevailing at the time of the present reference as to justify making out a new award 4 the Tribunal went wrong in taking the rise in the companyt of living index between the years 1954 and 1957 instead of taking the fluctuating rate in the index between the date of the earlier award, i.e., August 30, 1951, and the date of the present reference in the year 1957 5 the Tribunal went wrong in so far as it based its decision on the Second Engineering Award of 1950 which was already companysidered by the Tribunal in its earlier award of the year 1951 and 6 in any event, in companyputing the amount, the Tribunal applied wrong criteria. We shall companysider the above companytentions seriatim. But before doing so, it will be companyvenient to refer briefly to the scope of jurisdiction of this Court under Art. 136 of the Constitution vis-a-vis the awards of Tribunals. Article 136 of the Constitution does number companyfer a right of appeal to any party from the decision of any tribunal, but it companyfers a discretionary power on the Supreme Court to grant special leave to appeal from the order of any tribunal in the. territory of India. It is implicit in the discretionary reserve power that it cannot be exhaustively defined. It cannot obviously be so companystrued as to companyfer a right to a party where he has numbere under the law. The Industrial Disputes Act is intended to be a self-contained one and it seeks to achieve social justice on the basis of companylective bargaining, companyciliation and arbitration. Awards are given on circumstances peculiar to each dispute and the tribunals are, to a large extent, free from the restrictions of technical companysiderations imposed on companyrts. A free and liberal exercise of the power under Art. 136 may materially affect the fundamental basis of such decisions, namely, quick solution to such disputes to achieve industrial peace. Though Art. 136 is companyched in widest terms, it is necessary for this Court to exercise its discretionary jurisdiction only in cases where awards are made in violation of the principles of natural justice, causing substantial and grave injustice to parties or raises an important principle of industrial law requiring elucidation, and final decision by this Court or discloses such other exceptional or special circumstances which merit the companysideration of this Court. The points raised by the learned Counsel, except perhaps the first point , do number stand the test of any one of those principles. Learned Counsel for the Company, however, says that, though the said principles might be applied at the time of granting leave, once leave is given numbersuch restrictions companyld be imposed or applied at the time of the final disposal of the appeal. The limits to the exercise of the power under Art. 136 cannot be made to depend upon the appellant obtaining the special leave of this Court, for two reasons, viz., i at that stage the Court may number be in full possession Of all material circumstances to make up its mind and ii the order is only an ex parte one made in the absence of the respondent. The same principle should, therefore, be applied in exercising the power of interference with the awards of tribunals irrespective of the fact that the question arises at the time of granting special leave or at the time the appeal is disposed of. It would be illogical to apply two different standards at two different stages of the same case. The same view was expressed by this Court in Pritam Singh v. The State of Madras 1 , Hem Raj v. State of Ajmer 1 and sadhu Singh v. State of Pepsu 3 The first question turns upon the companystruction of the relevant provisions of the Act as amended by the Industrial Disputes Amendment and Miscellaneous Provisions Act, 1956. The relevant provisions inserted by the Amending Act read as follows Section 2 r I Tribunal means an Industrial Tribunal companystituted under section 7A. 7 A. Tribunals.- 1 The appropriate Government may, by numberification in the official Gazette, companystitute one or more Industrial Tribunals for the adjudication of industrial disputes relating to any matter, whether specified in the Second Schedule or the Third Schedule. A Tribunal shall companysist of one person only to be appointed by the appropriate Government. A person shall number be qualified for appointment as the presiding officer of a Tribunal unless- 1 1950 S.C.R. 453. 2 1954 S.C.R. 1153. A.I.R. 1954 S.C. 271. a he is, or has been, a Judge of a High Court or b he has held the office of the Chairman or any other member of the Labour Appellate Tribunal companystituted under the Industial Disputes Appellate Tribunal Act, 1950 48 of 1950 , or of any Tribunal, for a period of number less than two years. The appropriate Government may, if it so thinks fit, appoint two persons as assessors to advise the Tribunal in the proceeding before it. 33B. 1 The appropriate Government may, by order in writing and for reasons to be stated therein, withdraw any proceeding under this Act pending before a Labour Court, Tribunal, or National Tribunal, as the case may be, for the disposal of the proceeding and the Labour Court, Tribunal or National Tribunal to which the proceeding is so transferred may, subject to-special directions in the order of transfer, proceed either de numbero or from the stage at which it was so transferred Provided that where a proceeding under section 33 or section 33A is pending before a Tribunal or National Tribunal, the proceeding may also be transferred to a Labour Court. Section 30 of the Amending Act reads If immediately before the companymencement of this Act, there is pending any proceeding in relation to an industrial dispute before a Tribunal companystituted under the Industrial Disputes Act, 1947 14 of 1947 , as in force before such companymencement, the dispute may be adjudicated and the proceeding disposed of by the Tribunal after such companymencement, as if this Act has number been passed. Section 7, before the Amendment ran thus The appropriate Government may companystitute one or more Industrial Tribunals for the adjudication of industrial disputes in accordance with the provisions of this Act. A Tribunal shall companysist of such number of members as the appropriate Government thinks fit. Where the Tribunal companysists of two or more members, one of them shall be appointed as chairman. Every member of the Tribunal shall be an independent person, a who is or has been a Judge of a High Court or a District Judge, or b is qualified for appointment as a Judge of a High Court Provided that the appointment to a Tribunal of any person number qualified under part a shall be made in companysultation with the High Court of the Province in which the Tribunal has or is intended to have, its usual place of sitting. It will be seen from the aforesaid provisions that the Amending Act, which came into force on August 28, 1956, changed the companystitution of a tribunal to some extent and companyferred a power for the first time on the Government to transfer a proceeding pending before a tribunal to another tribunal or in the case of a proceeding under s. 33 or 33A pending before a tribunal to another tribunal or to a Labour Court. Section 30 of the Amending Act expressly saves a pending proceeding before a tribunal companystituted under the Act before the Amending Act came into force and directs that such dispute shall be adjudicated and the proceeding disposed of by that tribunal after the companymencement of the Amending Act as if that Act had number been passed. A companybined and fair reading of the aforesaid provisions, it is argued, was that s. 33B, inserted in the Act by the Amending Act, was prospective in operations i.e., it would apply only to proceedings initiated in the tribunal companystituted Under the amended Act and that proceedings pending before the tribunals companystituted under the Act before the companymencement of the Amending Act would be disposed of as if the Amending Act had number been passed. The Parliament, presumably to clarify the position, brought out another Amending Act styled the Industrial Disputes Amendment Act, 1957 18 of 1957 , whereunder among other things, a new definition of Tribunal was given in substitution of that in s. 2 r of the Act. The substituted definition reads Tribunal means an Industrial Tribunal companystituted under section 7A and includes an Industrial Tribunal companystituted before the 10th day of March, 1957, under this Act. Sub-section 2 of s. I of the Amending Act 18 of 1957 says that s. 2 shall be deemed to have companye into force on the 10th day of March, 1957. The result is that section 33B should be read along with the definition of a Tribunal inserted by the Amendment Act 18 of 1957, as if that definition was in the Act from March 10, 1957. If that definition of a Tribunal be read in place of the word ,Tribunal in s. 33B, the relevant part of that section reads The appropriate Government may, by order in writing and for reasons to be stated therein, withdraw any proceeding under this Act pending before a Tribunal companystituted before the 10th day of March, 1957, and transfer the same to another Tribunal companystituted under section 7A of the Act. So companystrued it follows that in respect of proceedings pending in a tribunal companystituted before the 10th day of March, 1957, the Government has the power to transfer them from that date to any other tribunal. It is said that this companystruction would make s. 30 of the Amending Act 36 of 1956 otiose or nugatory. That section companytained only a saving clause and it was number inserted in the Act it served its purpose, and even if it ceased to have any operative force after the Amendment of 1957, that circumstance cannot have any bearing on the impact of the amendment of the definition of Tribunal on the provisions of s. 33B of the Act. In the present case, the Government made the order of transfer on April 9, 1957, i.e., after s. 2 of Amendment Act 18 of 1957 was deemed to have companye into force. It must, therefore, be held that the Government acted well within its powers in transferring the dispute pending before the Second Industrial Tribunal, to the Fifth Industrial Tribunal. The second companytention, namely, that the Award of 1951 was number terminated in accordance with law, does number appear to have been pressed before the Tribunal. The governing section is s. 19 6 which says Notwithstanding the expiry of the period of operation under sub-section 3 , the award shall companytinue to be binding on the parties until a period of two months has elapsed from the date on which numberice is given by any party bound by the award to the other party or parties intimating its intention to terminate the award. In the first written-statement filed by the Company before the Tribunal, numberplea was taken based upon s. 19 6 of the Act. In the second written-statement filed by the Company on December 20, 1956, a companytention was raised to the effect that the award dated June 21, 1951, was number terminated under s. 19 6 of the Act, that the said award was binding between the parties and therefore the reference was bad in law. Notwithstanding the said allegation, the award dis- closes that numberissue was raised on that companynt and numberargument was advanced in support thereof. This attitude might have been adopted by the Company either because it did number think fit to rely upon a technical point but had chosen to get a decision of the Tribunal on merits, or it might be that there was numberbasis for the companytention, as the companypany might have received numberice under the said section. Though it may number be quite relevant, it may be mentioned that even in 1951 when the dispute between the parties was referred to the Industrial Tribunal, though a similar companytention was open to the Company and indeed was suggested by the Tribunal, it moved the Tribunal to give an award on the merits of the matter. If this plea had been seriously pressed, the Tribunal would have raised a separate issue and the Union would have been in a position to establish that numberice had been served on the Company as required by s. 19 6 of the Act. As the question raised depends upon elucidation of further facts, we do number think that we would be justified in allowing the Company to raise the plea before us, and we, therefore, do number permit them to do so. The fourth point turns on the companystruction of the terms of the agreement entered into between the parties on September 15, 1954. The dispute between the parties had an earlier origin and apart from the present reference, there were as many as four references and four awards, and the last of them was dated April 3, 1951. The Company preferred an appeal against that award to the Labour Appellate Tribunal-, Calcutta, which, with some modification, companyfirmed the award of the Tribunal on August 30, 1957. That award as modified by the Appellate Tribunal fixed the basic wages and the rate of dearness allowance payable to the employees. The employees were number satisfied with the award and they placed before the. Company a new charter of demands claiming higher rates of dearness allowance and wages, but the dispute was companypromised and the parties entered into an agreement dated September 15, 1954, by virtue of which, the Company introduced the incremental scale in the wage structure. As regards the dearness allowance, it was stated in cl. 1 1 of the agreement as follows The existing rate of D. A. will prevail unless there is a substantial change in the working class companyt of living index,in which case the rate will be suitably adjusted. On the companystruction of this clause depends the question of the Unions right to claim enhanced dearness allowance. It is companymon case that if the companyt of living index in the year 1951 was taken as the basis, there was a fall in the rate of working class companyt, of living index in 1957. On the other hand, if the companyt of living index in 1954 was the criterion, there was a substantial increase in the companyt of living index in 1957. The question, therefore, is what did the parties intend to agree by the aforesaid clause in the agreement. To ascertain the intention of the parties, we should company- sider the circumstances under which the said agreement was entered into between the parties. Exhibit 6 is the said agreement. The preamble to the agreement reads The Company and the Union came to a settlement in respect of the Pay Scales and Grades in the Charter of Demands dated 25th June, 1953, at the intervention of Shri A. R. Ghosh, Asstt. Labour Commissioner during the Conciliation proceedings ending on the 30th August, 1954. The preamble indicates that-the entire situation obtaining on the date of the agreement -was reviewed and the parties agreed to the terms of the settlement mentioned therein. Under clause 1 of the agreement, pay scale and grade as given in annexure B was agreed upon for the time being for a period of three years as an experimental measure, to be reviewed, modified or suspended or withdrawn after three years, depending upon the Companys business and financial companydition. By el. 2 , the employees agreed number to raise any dispute involving any further financial burden on the Company during the next three years in respect of pay scale and grade. Clauses 3 to 5 deal with increments and the age of retirement. Clause 6 provides for the piece-rated companytract workers in respect of their increments. Clause 7 is in respect of increment for the daily-rated workers. Clause 8 is in respect of the grade and scale of pay and increments of Chemists, Engineers and Doctors, etc. Clause 9 is to the effect that the employees who would be made permanent thence forward would be grouped under two divisions for the purposes of giving effect to the scale of pay. Clause 11 which we have already extracted above relates to the dearness allowance. Clause 12 says barring the question of bonus for 1358 and 1359 B. S.the Union withdraws its claim in respect of other items in the Charter of Demands dated 25th June, 1953. We have given the agreement in extenso only for the purpose of showing that all the disputes between the parties arising out of the charter of demands dated June, 25, 1953, were settled between them and reduced to writing. The agreement was self-contained and started a new chapter regulating the relationship of the parties to the dispute in respect of matters companyered by it. The award must be deemed to have been superseded by the new agreement. In this companytext the crucial words existing rate of D. A. , on which both the learned Counsel relied, companyld have only one meaning. Do the words existing rate refer to the date of the agreement or to the date of the award ? It is true that the existing rate of D. A. had its origin in the award and was made to prevail under the agreement, that is to say that the rate was accepted by the parties as reasonable on the date of the agreement, till there was a substantial change in the working class companyt of living index. If the companytention of the learned Counsel for the Company should prevail, the agreement would number be self-contained, but only to be companystrued as modifying the earlier award to some extent. We are satisfied that in regard to matters companyered by it, the agreement replaced the earlier award and therefore the date of the agreement is the crucial one for ascertaining whether there was substantial change in the working class companyt of living index in the year 1957. We, therefore, reject this companytention. Contentions 3, 5 and 6 raise pure questions of fact. The Tribunal, on the companysideration of the entire material placed before it, came to the companyclusion that there was change of circumstances which entitled the employees to claim an increase in their dearness allowance. It has also fixed the rate of increase in the dearness allowance on the basis of the rise in the companyt of living index. In doing so, it also took into companysideration the difficulties facing the industry and the repercussion of the rise in the dearness allowance on the companysumers in general. Having regard to the overall picture, it came to the companyclusion that full neutralisation of the deficiency as a result of rise in the companyt of living index by dearness allowance companyld number be permitted and therefore allowed them only 75 per cent. of the increase in the dearness allowance to which they would have otherwise been entitled on the basis of the rise in the companyt of living index. The finding given by the Tribunal is one on fact and we do number see any permissible ground for interference with it in this appeal by special leave. Before closing, one point strenuously pressed upon us by the learned Counsel for the Company which is really another attempt to attack the finding of fact given by the Tribunal from different angle must be mentioned it was that the Tribunal wrongly relied upon Exhibit 3, companyrected on the basis of the information given by the State Statistical Bureau, West Bengal, for ascertaining the working class companyt of living index since August 1954 up to March 1957. On the basis of Exhibit 3, the Tribunal held that the working class companyt of living index stood at 344.1 in August 1954 and it rose to 400.6 in May 1957, with the result that there was a rise of 56 points, a substantial rise in the companyt of living index. Exhibit 3 certainly supports the finding of the Tribunal. The learned Counsel for the Company points out with reference to the relevant entries in the Monthly Statistical Digest, West Bengal, that the said figures relate only to working class menials and the companyresponding entries in regard to the working class companyt of living index do number indicate so much increase as in the case of the menial class. Learned Counsel has also taken us through the relevant figures. The relevant entries in the Monthly Statistical Digest were number filed before the Tribunal. Indeed when the Unions witness, Shri Satyaranjan Sen, was examined before the Tribunal, he was number cross-examined with a view to elicit information that Exhibit 3 did number relate to the working class companyt of living index. When Shri Chatterjee, the Assistant Manager of the Company, who was examined after Shri Sen, gave evidence, he number only did number object to the entries in Exhibit 3 but stated that he was number aware of any substantial increase in the working class companyt of living index and companyplained that similar entries for all the relevant years had number been produced. Even before the Tribunal it does number appear that any argument was advanced companytesting the relevancy of Exhibit 3 on the ground that it did number refer to the working class companyt of living index. In the circumstances, we do number think that we are justified to allow the learned Counsel -for the Company to make out a new case for the first time before us, upsetting the Tribunals basis for calculation and involving further and different calculations. In the result, we companyfirm the award of the Tribunal and dismiss the appeal with companyts. The learned Counsel, appearing for the Union, did number press the appeal No.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 215 of 1955. Appeal from the judgment and decree dated April 1, 1953, of the Calcutta High Court in Appeal from Original Decree No. 89 of 1946, arising, out of the judgment and decree dated December 4, 1945, of the Subordinate Judge, Darjeeling, in Money Suit No. 5 of 1940. K. Jha and D. N. Mukherjee, for the appellant. B. Aggarwala, K. B. Bagchi and Sukumar Ghosh, for Respondents Nos. 1 to 5. 1959. March 26. The Judgment of the Court was delivered by SUBBA RAO, J.-This appeal filed against the judgment of the High Court of Judicature at Calcutta raises the question of the legality of a partnership to carry on business in wagering companytracts. The facts lie in a small companypass. They, omitting those number germane to the companytroversy before us, are as follows The appellant, Gherulal Parakh, and the first respondent, Mahadeodas Maiya, managers of two joint families entered into a partnership to carry on wagering companytracts with two firms of Hapur, namely, Messrs. Mulchand Gulzarimull and Baldeosahay Surajmull. It was agreed between the partners that the said companytracts would be made in the name of the respondents on behalf of the firm and that the profit and loss resulting from the transactions would be borne by them in equal shares. In implementation of the said agreement, the first respondent entered into 32 companytracts with Mulchand and 49 companytracts with Baldeosahay and the nett result of all these transactions was a loss, with the result that the first respondent had to pay to the Hapur merchants the entire amount due to them. As the appellant denied his liability to bear his share of the loss, the first respondent along With his sons filed O. S. No. 18 of 1937 in the Court of the Subordinate Judge, Darjeeling, for the recovery of half of the loss incurred in the transactions with Mulchand. In the plaint he reserved his right to claim any further amount in respect of transactions with Mulchand that might be found due to him after the accounts were finally settled with him. That suit was referred to arbitration and on the basis of the award, the Subordinate Judge made a decree in favour of the first respondent and his sons for a sum of Rs. 3,375. After the final accounts were settled between the first respondent and the two merchants of Hapur and after the amounts due to them were paid, the first respondent instituted a suit, out of which the present appeal arises, in the Court of the Subordinate Judge, Darjeeling, for the recovery of a sum of Rs. 5,300 with interest thereon. Subsequently the plaint was amended and by the amended plaint the respondents asked for the same relief on the basis that the firm had been dissolved. The appellant and his sons, inter alia, pleaded in defence that the agreement between the parties to enter into wagering companytracts was unlawful under s. 23 of the Contract Act, that as the partnership was number registered, the suit was barred under s. 69 1 of the Partnership Act and that in any event the suit was barred under S. 2, Rule 2 of the Code of Civil Procedure. The learned Subordinate Judge found that the agreement between the parties was to enter into wagering companytracts depending upon the rise and fall of the market and that the said agreement was void as the said object was forbidden by law and opposed to public policy. He also found that the claim in respect of the transactions with Mulchand so far as it was number included in the earlier suit was number barred under s. 2, Rule 2, Code of Civil Procedure, as the cause of action in respect of that part of the claim did number arise at the time the said suit was filed. He further found that the partnership was between the two joint families of the appellant and the first respondent respectively, that there companyld number be in law such a partnership and that therefore s. 69 of the Partnership Act was number applicable. In the result, he dismissed the suit with companyts. On appeal, the learned Judges of the High Court held that the partnership was number between the two joint families but was only between the two managers of the said families and therefore it was valid. They found that the partnership to do business was only for a single venture with each one of the two merchants of Hapur and for a single season and that the said partnership was dissolved after the season was over and therefore the suit for accounts of the dissolved firm was number- hit by the provisions of subsections 1 and 2 of s. 69 of the Partnership Act. They further found that the object of the partnere was to deal in differences and that though the said transactions, being in the nature of wager, were void under s. 30 of the Indian Contract Act, the object was number unlawful within the meaning of s. 23 of the said Act. In regard to the claim, the learned Judges found that there was numbersatisfactory evidence as regards the payment by the first respondent on account of loss incurred in the companytracts with Mulchand but it was established that he paid a sum of Rs. 7,615 on account of loss in the companytracts entered into with Baldeosahay. In the result, the High Court gave a decree to the first respondent for a sum of Rs. 3,807-8-0 and disallowed interest thereon for the reason that as the suit in substance was one for accounts of a dissolved firm, there was numberliability in the circumstances of the case to pay interest. In the result, the High Court gave a decree in favour of the first respondent for the said amount together with another small item and dismissed the suit as regards the plaintiffs other than the first respondent and the defendants other than the appellant . Before we companysider the questions of law raised in the case, it would -be companyvenient at the outset to dispose of questions of fact raised by either party. The learned Counsel for the appellant companytends that the finding of the learned Judges of the High Court that the partnership stood dissolved after the season was over was number supported by the pleadings or the evidence adduced in the case. In the plaint as originally drafted and presented to the Court, there was numberexpress reference to the fact that the business was dissolved and numberrelief was asked for accounts of the dissolved firm. But the plaint discloses that the parties jointly entered into companytracts with two merchants between March 23, 1937, and June 17, 1937, that the plaintiffs obtained companyplete accounts of profit and loss on the aforesaid transactions from the said merchants after June 17, 1937, that they issued a numberice to the defendants to pay them a sum of Rs. 4,146-4-3, being half of the total payments made by them on account of the said companytracts and that the defendants denied their liability. The suit was filed for recovery of the said amount. The defendant filed a written-statement on June 12, 1940, but did number raise the plea based on s. 69 of the Partnership Act. He filed an additional written-statement on November 9, 1941, expressly setting up the plea. Thereafter the plaintiffs prayed for the amendment of the, plaint by adding the following to the plaint as paragraph That even Section 69 of the Indian Partnership Act is number a bar to the present suit as the joint business referred to above was dissolved and in this suit the Court is required only to go into the accounts of the said joint business . On August 14, 1942, the defendant filed a further additional written-statement alleging that the allegations in paragraph 2 were number true and that as numberdate of the alleged dissolution had been mentioned in the plaint, the plaintiffs case based on the said alleged dissolution was number maintainable. It would be seen from the aforesaid pleadings that though an express allegation of the fact of dissolution of the partnership was only made by an amendment on November 17, 1941, the plaint as originally presented companytained all the facts sustaining the said plea. The defendants in their written-statement, inter alia, denied that there was any partnership to enter into forward companytracts with the said two merchants and that therefore companysistent with their case they did number specifically deny the said facts. The said facts, except in regard to the question whether the partnership was between the two families or only between the two managers of the families on which there was difference of view between the Court of the Subordinate Judge and the High Court, were companycurrently found by both the Courts. It follows from the said findings that the partnership was only in respect of forward companytracts with two specified individuals and for a particular season. But it is said that the said findings were number based on any evidence in the case. It is true that the documents did number clearly indicate any period limiting the operation of the partnership, but from the attitude adopted by the defendants in the earlier suit ending in an award and that adopted in the present pleadings, the nature of the transactions and the companyduct of the parties, numberother companyclusion was-possible than that arrived at by the High Court. If so, s. 42 of the Partnership Act directly applies to this case. Under that section in the absence of a companytract to the companytrary, a firm is dissolved, if it is companystituted to carry out one or more adventures or undertakings, by companypletion thereof. In this case, the partnership was companystituted to carry out companytracts with specified persons during a particular season and as the said companytracts were closed, the partnership was dissolved. At this stage a point raised by the learned Counsel for the respondents may companyveniently be disposed of. The learned Counsel companytends that neither the learned Subordinate Judge number the learned Judges of the High Court found that the first respondent entered into any wagering transactions with either of the two merchants of Hapur and therefore numberquestion of illegality arises in this case. The law on the subject is wellsettled and does number call for any citation of cases. To companystitute a wagering companytract there must be proof that the companytract was entered into upon terms that the performance of the companytract should number be demanded, but only the difference in prices should be paid. There should be companymon intention between the parties to the wager that they should number demand delivery of the goods but should take only the difference in prices on the happening of an event. Relying upon the said legal position, it is companytended that there is numberevidence in the case to establish that there was a companymon intention between the first respondent and the Hapur merchants number to take delivery of possession but only to gamble in difference in prices. This argument, if we may say so, is number really germane to the question raised in this case. The suit was filed on the basis of a dissolved partnership for accounts. The defendants companytended that the object of the partnership was to carry on wagering transactions, i. e., only to gamble in differences without any intention to give or take delivery of goods. The Courts, on the evidence, both direct and circumstantial, came to the companyclusion that the partnership agreement was entered into with the object of carrying on wagering transactions wherein there was numberintention to ask for-or to take delivery of goods but only to deal with differences. That is a companycurrent finding of fact, and, following the usual practice of this Court, we must accept it. We, therefore, proceed on the basis that the appellant and the first respondent entered into a partnership for carrying on wagering transactions and the claim related only to the loss incurred in respect of those transactions. Now we companye to the main and substantial point in the case. The problem presented, with its different facets, is whether the said agreement of partnership is unlawful within the meaning of s. 23 of the Indian Contract Act. Section 23 of the said Act, omitting portions unnecessary for the present purpose, reads as follows The companysideration or object of an agreement is lawful, unless- it is forbidden by law, or the Court regards it as immoral, or opposed to public policy. In each of these cases, the companysideration or object of an agreement is said to be unlawful. Every agreement of which the object or companysideration is unlawful is void. Under this section, the object of an agreement, whether it is of partnership or otherwise, is unlawful if it is forbidden by law or the Court regards it as immoral or opposed to public policy and in such cases the agreement itself is void. The learned Counsel for the appellant advances his argument under three sub-heads i the object is forbidden by law, it is opposed to public policy, and iii it is immoral. We shall companysider each one of them separately. Re. i --forbidden by law Under s. 30 of the Indian Contract Act, agreements by way of wager are void and numbersuit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made. Sir William Ansons definition of wager as a promise to give money or moneys worth upon the determination or ascertainment of an uncertain event accurately brings out the companycept of wager declared void by s. 30 of the Contract Act. As a companytract which provides for payment of differences only without any intention on the part of either of the parties to give or take delivery of the goods is admittedly a wager within the meaning of s. 30 of the Contract Act, the argument proceeds, such a transaction, being void under the said section, is also forbidden by law within the meaning of s. 23 of the Contract Act. The question, shortly stated, is whether what is void can be equated with what is forbidden by law. This argument is number a new one, but has been raised in England as well as in India and has uniformly been rejected. In England the law relating to gaming and wagering companytracts is companytained in the Gaming Acts of 1845 and 1892. As the decisions turned upon the relevant provisions of the said Acts, it would help to appreciate them better if the relevant sections of the two Acts were read at this stage Section 18 of the Gaming Act, 1845 Contracts by way of gaming to be void, and wagers or sums deposited with stakeholders number to be recoverable at law- Saving for subscriptions for prizes All companytracts or agreements, whether by parole or in writing, by way of gaming or wagering, shall be null and void and numbersuit shall be brought or maintained in any companyrt of law and equity for recovering any sum of money or valuable thing alleged to be won upon any wager, or which shall have been deposited in the hands of any person to abide-the event on which any wager shall have been made Provided always, that this enactment shall number be deemed to apply to any subscription or companytribution, or agreement to subscribe or companytribute, for or towards any plate, prize or sum of money to be awarded -to the winner or winners of any lawful game, sport, pastime or exercise. Section 1 of the Gaming Act, 1892 Promises to repay sums paid under companytracts void by 8 9 Viet. c 109 to be null and void.-Any promise, express or implied, to pay any person any sum of money paid by him under or in respect of any companytract or agreement rendered null and void by the Gaming Act, 1845, or to pay any sum of money by way of companymission, fee, reward, or otherwise in respect of any such companytract, or of any services in relation thereto or in companynexion therewith, shall be null and void, and numberaction shall be brought or maintained to recover any such sum of money. While the Act of 1845 declared all kinds of wagers or games null and void, it only prohibited the recovery of money or valuable thing won upon any wager or desposited with stakeholders. On the other hand, the Act of 1892 further declared that moneys paid under or in respect of wagering companytracts dealt with by the Act of 1845 are number recoverable and numbercommission or reward in respect of any wager can be claimed in a companyrt of law by agents employed to bet on behalf of their principals. The law of England till the passing of the Act of 1892 was analogous to that in India and the English law on the subject governing a similar situation would be of companysiderable help in deciding the present case. Sir William Anson in his book On Law of Contracts succinctly states the legal position thus, at page 205 the law may either actually forbid an agreement to be made, or it may merely say that if it is made the Courts will number enforce it. In the former case it is illegal, in the latter only void but inasmuch as illegal companytracts are also void, though void companytracts are number necessarily illegal, the distinction is for most purposes number important, and even judges seem sometimes to treat the two terms as inter- changeable. The learned author proceeds to apply the said general principles to wagers and observes, at page 212, thus Wagers beidg only void, numbertaint of illegality attached to a transaction, whereby one man employed another to make bets for him the ordinary rules which govern the relation of employer and employed applied in such a case. Pollock and Mulla in their book on Indian Contract define the phrase ,forbidden by law in s. 23 thus, at page 158 An act or undertaking is equally forbidden by law whether it violates a prohibitory enactment of the Legislature or a principle of unwritten law. But in India, where the criminal law is companyified, acts forbidden by law seem practically to companysist of acts punishable under the Penal Code and of acts prohibited by special legislation, or by regulations or orders made under authority derived from the Legislature. Some of the decisions, both English and Indian, cited at the Bar which bring out the distinction between a companytract which is forbidden by law and that which is void may number be numbericed. In Thacker v. Hardy 1 , the plaintiff, a broker, who was employed by the defendant to speculate for him upon the stock Exchange, entered into companytracts on behalf of the defendant with a third party upon which he the plaintiff became personally liable. He sued the defendant for indemnity against the liability incurred by him and for companymission as broker. The Court held that the plaintiff was entitled to recover numberwithstanding the provisions of 8 9 Viet. c. 109, s. 18 English Gaming Act, 1845 . Lindley, J., observed at page 687 Now, if gaming and wagering were illegal, I should be of opinion that the illegality of the transactions in which the plaintiff and the defendant were engaged would have tainted, as between themselves, whatever the plaintiff had done in futherance of their illegal designs, and would have precluded him from claiming, in a companyrt of law, any indemnity from the defendant in respect of the liabilities he had incurred Cannan v. Bryce 3 B. Ald. 179 McKinnell v. Robinson 3 M. W. 434 Lyne v. Siesfeld 1 N. 278 . But it has been held that although gaming and wagering companytracts cannot be enforced, they are 1 1878 L.R. 4 Q.B. 685. number illegal. Fitch v. Jones 5 E. B. 238 is plain to that effect. Money paid in discharge of a bet is a good companysideration for a bill of exchange Oulds v. Harrison 10 Ex. 572 and if money be so paid by a plaintiff at the request of a defendant, it can be recovered by action against him Knight v. Camber 15 C.B. 562 Jessopp v. Lutwyoho 10 Ex. 614 Rosewarne v. Billing 15 C. B. S. 316 and it has been held that a request to pay may be inferred from an authority to bet Oldham v. Ramsden 44 L. J. C. P. 309 . Having regard to these decisions, I cannot hold that the statute above referred to precludes the plaintiff from maintaining this action. In Read v. Anderson. 1 where an agent was employed to make a bet in his own name on behalf of his principal, a similar question arose for companysideration. Hawkins, J., states the legal position at page 104 At companymon law wagers were number illegal, and before the passing of 8 9 Vict. c. 109 actions were companystantly brought and maintained to recover money won upon them. The object of 8 9 Viet. c. 109 passed in 1845 was number to render illegal wagers which up to that time had been lawful, but simply to make the law numberlonger available for their enforcement, leaving the parties to them to pay them or number as their sense of honour might dictate. After citing the provisions of s. 18 of that Act, the learned Judge proceeds to observe thus, at page 105 There is numberhing in this language to affect the legality of wagering companytracts, they are simply rendered null and void and number enforceable by any process of law. A host of authorities have settled this to be the true effect of the Statute. This judgment of Hawkins, J., was companyfirmed on appeal reported in 13 Q. B. 779 on the ground that the agency became irrevocable on the making of the bet. The judgment of the Court of Appeal cannot be companysidered to be a direct decision on the point. The said principle was affirmed by the Court of Appeal again in Bridger v. Savage 2 . There the plaintiff sued his 1 1882 L.R. 10 Q.B. 100. 2 1885 L.R. 15 Q.B. 363. agent for the amount received by him in respect of the winnings from the persons with whom the agent had betted. Brett, M. R., observed at page 366 the defendant has received money which he companytracted with the plaintiff to hand over to him when he had received it. That is a perfectly legal companytract but for the defendant it has been companytended that the statute 8 9 Vict. c. 109, s. 18, makes that companytract illegal. The answer is that it has been held by the Courts on several occasions that the statute applies only to the original companytract -made between the persons betting, and number to such a companytract as was made here between the plaintiff and defendant. Bowen, L. J., says much to the same effect at page 367 Now with respect to the principle involved in this case, it is to be observed that the original companytract of betting is number an illegal one, but only one which is void. If the person who has betted pays his bet, he does numberhing wrong he only waives a benefit which the statute has given to him, and Confers a good title to the money on the person to whom he pays it. Therefore when the bet is paid the transaction is companypleted, and when it is paid to an agent it cannot be companytended that it is number a good payment for his prin- cipal So much, therefore, for the principle governing this case. As to the authorities, the cases of Sharp v. Taylor 2 Phil. 801 , Johnson v. Lansley 12 C. B. 468 , and Beeston v. Beeston I Ex. D. 13 , all go to shew that this action is maintainable, and the only authority the other way is that of Beyer v. Adams 26 L. J. Ch. 841 , and that case cannot be supported, and is number law. This case lays down the companyrect principle and is supported by earlier authorities. The decision in Partridge v. Mallandaine 1 is to the effect that persons receiving profits from betting systematically carried on by them are chargeable with income-tax on such profits in respect of a vocation under 5 6 Vict. c. 35 the Income Tax Act Schedule D. Hawkins, J., rejecting the argument that the 1 1887 L.R. 18 Q.B. 276. profession of bookmakers is number a calling within the meaning of the Income Tax Act, makes the following observations, at page 278 Mere betting is number illegal. It is perfectly lawful for a man to bet if he likes. He may, however, have a difficulty in getting the amount of the bets from dishonest persons who make bets and will number pay. The decision in Hyams v. Stuart King 1 deals with the problem of the legality of a fresh agreement between parties to a wager for companysideration. There, two bookmakers had betting transactions together, which resulted in the defendant giving the plaintiff a cheque for the amount of bets lost to him. At the request of the defendant, the cheque was held over by the plaintiff for a time, and part of the amount of the cheque was paid by the defendant. Subsequently a fresh verbal agreement was companye to between the parties, by which, in companysideration of the plaintiff holding over the cheque for a further time and refraining from declaring the defendant a defaulter and thereby injuring him with his customers, the defendant promised to pay the balance owing in a few days. The balance was never paid and the plaintiff filed a suit to recover the money on the basis of the fresh verbal agreement. The Court of Appeal, by a majority, Fletcher Moulton, L. J., dissenting, held that the fresh verbal agreement was supported by good companysideration and therefore the plaintiff was entitled to recover the amount due to him. At page 705, Sir Gorell Barnes posed the following three questions to be decided in the case 1 Whether the new companytract was itself one which falls within the provisions of 8 9 Vict. c. 109, s. 18 2 whether there was any illegality affecting that companytract and 3 whether that companytract was a lawful companytract founded on good companysideration. Adverting to the second question, which is relevant to the present case, the President made the following observations at page 707 it is to be observed that there was numberhing illegal in the strict sense in making the bets. 1 1908 2 K.B. 696. They were merely void under 8 9 Vict. c. 109, and there would have been numberillegality in paying them. There is numberdoubt whatever about this. There was also numberhing illegal in giving the cheque number would there have been any illegality in paying it, though the defendants companyld number have been companypelled by the plaintiff to pay it, because by statute it was to be deemed and taken to have been made and given for an illegal companysideration, and therefore void in the hands of the plaintiff The statutes do number make the giving or paying of the cheque illegal, and impose numberpenalty for so doing. Their effect and intention appear only, so far as material, to be that gaming or wagering companytracts cannot be enforced in a Court of Law or Equity The view expressed by the President is therefore companysistent with the view all along accepted by the Courts in England. This case raised a number problem, namely, whether a substituted agreement for companysideration between the same parties to the wager companyld be enforced, and the majority held that it companyld be enforced, while Fletcher Moulton, L. J., recorded his dissent. We shall have occasion to numberice the dissenting view of Fletcher Moulton, L. J., at a later stage. The aforesaid decisions establish the proposition that in England a clear distinction is maintained between a companytract which is void and that which is illegal and it has been held that though a wagering companytract is void and unenforceable between parties, it is number illegal and therefore it does number affect the validity of a companylateral companytract. The same principle has been applied to companylateral companytracts of partnership also. In Thwaites v. Coulthwaite 1 the question of legality of a partnership of bookmaking and betting was raised. There the plaintiff and defendant were partners in a-bookmakers and betting business, which was carried on by the defendant the plaintiff claimed an account of the profits of the partnership, and the defendant companytended that, having regard to the nature of the business, numbersuch relief companyld be obtained. Chitty, J., rejected the 1 1896 1 Ch. 496. plea holding that the partnership was valid, for the following reasons, among others, and stated at page 498 - The Gaming Act, 1845 8 9 Vict. c. 109 , did number make betting illegal this statute, as is well known, merely avoided the wagering companytract. A man may make a single bet or many bets he may habitually bet he may carry on a betting or bookmakers business within the statute, provided the business as carried on by him does number fall within the prohibition of the Betting Act, 1853. In Thomas v. Day 1 , a similar question arose. There the plaintiff claimed an account and money due under a partnership which he alleged had existed between himself and the defendant to take an office and carry on a betting business as bookmakers. Darling, J., held that a partnership to carry on the business of a bookmaker was number recognized by law, that even if there was such a legal partnership, an action for account would number lie as between the two bookmakers founded on betting and gambling transactions. This judgment certainly supports the appellant but the learned Judge did number take numberice of the previous decision on the subject and the subsequent decisions have number followed it. When a similar objection was raised in Brookman v. Mather 2 , Avery, J., rejected the plea and gave a decree to the plaintiff. There the plaintiff and the defendant entered into a partnership to carry on a betting business. Two years thereafter, in 1910, the partnership was dissolved and a certain amount was found due to the plaintiff from the defend ant and the latter gave the former a promissory numbere for that amount. A suit was filed for the recovery of the amount payable under the promissory numbere. Avery, J., reiterated the principle that betting was number illegal per se. When the decision in Thomas Day 1 was cited in support of the broad principle that the betting business companyld number be recognized as legal in a Court of Justice, the learned Judge pointed out that that case was decided without reference to Thwaites 1 1908 24 T.L.R. 272. 2 1913 29 T.L.R. 276. Coulthwaite 1 . This judgment, therefore, companyrected the deviation made by Darling, J., in Thomas v. Day 2 and put the case law in line with earlier precedents. The earlier view was again accepted and followed in Keen v. Price 3 where an action by one of the partners in a bookmakers and betting business against the other for an account of the partnership dealings was entertained. But the Court gave liberty to the defendant to object to repaying anything which represented profits in such business. The reason for this apparent companyflict between the two parts of the decision is found in the express terms of the provisions of the Gaming Act of 1892. Commenting upon Thwaites v. Coulthwaite 1 in which Chitty, J., held that such an action would lie for an account of the profits of the partnership, Sargant, J., pointed out that in that case the Gaming Act, 1892, was number referred to. At page 101, the learned Judge says Curiously enough, in that case the Gaming Act, 1892, was number referred to, and although the decision is a good one on the general law, it cannot be regarded as a decision on the Act of 1892. This judgment companyfirms the principle that a wager is number illegal, but states that after the Gaming Act, 1892, a claim in respect of that amount even under a companylateral agreement is number maintainable. In OConnor and Ould v. Ralston 4 , the plaintiff, a firm of bookmakers, filed a suit claiming from the defendant the amount of five cheques drawn by him upon his bank in payment of bets which he had lost to them and which had been dishonoured on presentation. Darling, J., held that as the plaintiffs formed an association for the purpose of carrying on a betting business, the action would number lie. In companying to that companyclusion the learned Judge relied upon the dissenting view of Fletcher Moulton, L. J., in Hyams v. Stuart King We shall companysider that decision at a later stage. 1 1896 1 Ch. 496. 2 1908 24 T.L.R. 272. 3 1914 2 Ch. 98. 4 1920 3 K.B. 451. 5 1908 2 K.B. 696. The opinion of Darling, J., was number accepted in Jeffrey Co. Bamford 1 wherein McCardie, J., held that a partnership for the purpose of carrying on a betting and bookmakers business is number per se illegal or impossible in law. The learned Judge says at page 356 betting or wagering is number illegal at companymon law . It has been repeatedly pointed out that mere betting on horse races is number illegal . The learned Judge, after numbericing the earlier decisions already companysidered by us and also some of the observations of Fletcher Moulton, L. J., came to the companyclusion that the partnership was number illegal. We shall number scrutinize the decision in Hill v. William Hill I to see whether there is any substance in the argument of the learned Counsel for the appellant that this decision accepted the dissenting view of Fletcher Moulton, L. J., in Hyams v. Stuart King 3 or the view of Darling, J., in Thomas v. Day 4 and OConnor and Ould v. Ralston 5 . The facts in that case were The appellant had betting transactions with the respondents, a firm of bookmakers. As a result of those transactions, the appellant lost pound 3,635-12-6. As the appellant was unable to pay the amount, the matter was referred to the companymittee of Tattersalls, who decided that the appellant should pay the respondents a sum of pound 635-12-6 within fourteen days and the balance by monthly instalments of pound 100. It was laid down that if the appellant failed to make those payments, he was liable to be reported to the said companymittee which would result in his being warned off Newmarket Heath and posted as defaulters The appellant informed the respondents that he was unable to pay the pound 635-12-6 within the prescribed time and offered to send them a cheque for that sum post- dated October 10, 1946, and to pay the monthly instalments of pound 100 thereafter. On the respondents agreeing to that companyrse, the appellant sent a post-dated cheque to 1 1921 2 K.B. 351. 2 1949 2 All E.R. 452. 3 1908 2 K.B. 696. 4 1908 24 T.L.R. 272. 5 1920 3 K.B. 451. them and also enclosed a letter agreeing- to pay the monthly instalments. As the post-dated cheque was dishonoured and the appellant failed to pay the entire amount, the respondents filed a suit claiming the amount due to them under the subsequent agreement. The respondents companytended that the sum the appellant had promised to pay was number money won upon a wager within the meaning of the second branch of s. 18, but was money due under a new lawful and enforceable agreement and that even if the sum was to be regarded as won on a wager, the agreement was outside the scope of the second branch of s. 18 of the Gaming Act, 1845. The House of Lords by a majority of 4 to 3 held that the agreement companytained a new promise to pay money won upon a wager and that the second branch of s. 18 applied to all suits brought to recover money alleged to have been won on a wager and therefore the companytract was unenforceable. In companying to that companyclusion, Viscount Simon, one of the Judges who expressed the majority view, agreed with Fletcher Moulton, L. J., in holding that the bond companystituted an agreement to pay money won upon a wager, numberwithstanding the new companysideration, and was thus unenforceable under the second limb of s. 18. In Hyams v. Stuart King 1 , the facts of which we have already given, the suit was filed on the basis of a subsequent agreement between the same parties to the wager. The majority of the Judges held that the subsequent agreement was supported by good companysideration, while Fletcher Moulton, L. J., dissented from that view. The basis for the dissenting view is found at page 712. After reading s. 18 of the Gaming Act, 1845, the learned Judge proceeded to state In my opinion too little attention has been paid to the distinction between the two parts of this enactment, and the second part has been treated as being in effect merely a repetition of the first part. I cannot accept such an interpretation. So far as the actual wagering companytract is companycerned, the earlier provision is ample. It makes that companytract absolutely void, 1 1908 2 K.B. 696. and it would be idle to enact in addition that numbersuit should be brought upon a companytract that had thus been rendered void by statute. The language of the later provision is in my opinion much wider. It provides with companyplete generality that numberaction shall be brought to recover anything alleged to be won upon any wager, without in any way limiting the application of the provision to the wagering companytract -itself. In other words, it provides that wherever the obligation under a companytract is or includes the payment of money won upon a wager, the Courts shall number be used to enforce the performance of that part of the obligation . These observations must be understood in the companytext of the peculiar facts of that case. The suit was between the parties to the wager. The question was whether the second part of the companycerned section was companyprehensive enough to take in an agreement to recover the money won upon a wager within the meaning of that part. Fletcher Moulton, L. J., held that the second part was wide and companyprehensive enough to take in such a claim, for the suit was, though on the basis of a substituted agreement, for the recovery of the money won upon a wager within the meaning of the words of that part of the section. The second question companysidered by the learned Judge was whether the defendants firm which was an association formed for the purpose of a betting business was a legal partnership under the English Law. The learned Judge relied upon the Gaming Act. 1892 in holding that it was number possible under the English law to have any such partnership. At page 718, the learned Judge observed In my opinion numbersuch partnership is -possible under English law. Without companysidering any other grounds of objection to its existence, the language of the Gaming Act, 1892, appears to me to be sufficient to establish this proposition. It is essential to the idea of a partnership that each partner is an agent. of the partnership and subject to the provisions of the partnership deed has authority to make payments on its behalf for partnership purposes, for which he is entitled to claim credit in the partnership accounts and thus receive, directly or indirectly, repayment. But by the Gaming Act, 1892, all promises to pay any person any sum of money paid by him in respect of a wagering companytract are null and void. These words are wide enough to nullify the fundamental companytract which must be the basis of a partnership, and therefore in my opinion numbersuch partnership is possible, and the action for this reason alone was wrongly framed and should have been dismissed with companyts . It would be seen from the said observations that Fletcher Moulton, L. J., laid down two propositions i The second part of s. 18 of the Gaming Act, 1845, was companyprehensive enough to take in a claim for the recovery of money alleged to be won upon a wager though the said claim was based upon a substituted companytract between the same parties and ii by reason of the wide terms of the Gaming Act, 1892, even the fundamental companytract, which was the basis of a partnership, was itself a nullity. The learned Lord Justice did number purport to express any opinion on the effect of a void companytract of wager on a companylateral companytract. In Hills case 1 the only question that arose was whether the second part of s. 18 was a bar to the maintainability of a suit under a substituted agreement for the recovery of money won upon a wager. The majority accepted the view of Fletcher Moulton, J., on the first question. The second question did number arise for companysideration in that case. The House of Lords neither expressly number by necessary implication purported to hold that companylateral companytract of either partnership or agency was illegal and that the long catena of decisions already referred to by us were wrongly decided. This judgment does number therefore support the companytention of the learned Counsel for the appellant. The legal position in India is number different. Before the Act for Avoiding Wagers, 1848, the law relating to wagers that was in force in British India was the companymon law of England. The Judicial Committee in Ramloll Thackoorseydass Soojumnull Dhondmull 2 1 1921 2 K.B. 351. 2 1848 4 M.I.A. 339. expressly ruled that the companymon law of England was in force in India and under that law an action might be maintained on a wager. The wager dealt with in that case was upon the average price which opium would fetch at the next Government sale at Calcutta. Lord Campbell in rejecting the plea that the wager was illegal observed at page 349 The Statute, 8 9 Viet. c. 109, does number extend to India and although both parties on the record are Hindoos, numberpeculiar Hindoo law is alleged to exist upon the subject therefore this case, must be decided by the companymon law of England . It is a direct decision on the point number mooted before us and it is in favour of the respondents. Again the Privy Council companysidered a similar question in Doolubdass Pettamberdass v. Ramloll Thackoorseydass and others There again the wager was upon the price that the Patna opium would fetch at the next Government sale at Calcutta. There the plaintiff instituted a suit in the Supreme Court of Bombay in January, 1847, to recover the money won on a wager. After the suit was filed, Act 21 of 1848 was passed by the Indian Legislature where under all agreements whether made in speaking, writing, or otherwise, by way of gaming or wagering, would be null and void and numbersuit would be allowed in any Court of Law or Equity for recovering any sum of money or valuable thing alleged to be won on any wager. This section was similar in terms to that of s. 18 of the Gaming Act, 1845. Their Lordships held that the companytract was number void and the Act 21 of 1848 would number invalidate the companytracts entered into before the Act came into force. Adverting to the next argument that under Hindu Law such companytracts were void, they restated their view expressed in Ramloll Thackoorserdas v. Soojumnull Dhondmull 2 thus at page 127 Their Lordships have already said that they are number satisfied from the authorities referred to, that such is the law among the Hindoos . The Judicial Committee again restated the law in similar terms in Raghoonauth Sahoi Chotayloll v. 1 1850 5 M.I.A. 109. 2 1848 4 M.I.A. 339. Manickchund and Kaisreechund 1 . There the Judicial Committee held that a wagering companytract in India upon the average price opium would fetch at a future Government sale, was legal and enforceable before the passing of the Legislative Act, No. 21 of 1848. The aforesaid three decisions of the Privy Council clearly establish the legal position in India before the enactment of the Act 21 of 1848, namely, that wagering companytracts were governed by the companymon law of England and were number void and therefore enforceable in Courts. They also held that the Hindu Law did number prohibit any such wagers. The same view was expressed by the Indian Courts in cases decided after the enactment of the Contract Act. An agent who paid the amount of betting lost by him was allowed to recover the same from his principal in Pringle v. Jafar Khan 2 . The reason for that decision is given at page 445 There was numberhing illegal in the companytract betting at horse-races companyld number be said to be illegal in the sense of tainting any transaction companynected with it. This distinction between an agreement which is only void and one in which the companysideration is also unlawful is made in the Contract Act. Section 23 points out in what cases the companysideration of an agreement is unlawful, and in such cases the agreement is also void, that is, number enforceable at law. Section 30 refers to cases in which the agreement is only void, though the companysideration is number necessarily unlawful. There is numberreason why the plaintiff should number recover the sum paid by him . In Shibho Mal v. Lachman Das 3 an agent who paid the losses on the wagering transactions was allowed to recover the amounts he paid from his principal. In Beni Madho Das Kaunsal Kishor Dhusar 4 the plaintiff who lent money to the defendant to enable him to pay off a gambling debt was given a decree to recover the same from the defendant. Where two partners entered into a companytract of wager with a third 1 1856 6 M.I.A. 251. 3 1901 I.L.R. 23 All. 165. 2 1883 I.L.R. 5 All. 443. 4 1900 I.L.R. 22 All. 452. party and one partner had satisfied his own and his company partners liability under the companytract, the Nagpur High Court, in Md. Gulam Mustafakhan v. Padamsi 1 held that the partner who paid the amount companyld legally claim the other partners share of the loss. The learned Judge reiterated the same principle accepted in the decisions cited supra, when he said at page 49 Section 30 of the Indian Contract Act does number affect agreements or transactions companylateral to wagers . The said decisions were based upon the well-settled principle that a wagering companytract was only void, but number illegal, and therefore a companylateral companytract companyld be enforced. Before closing this branch of the discussion, it may be companyvenient to companysider a subsidiary point raised by the learned Counsel for the appellant that though a companytract of partnership was number illegal, in the matter of accounting, the loss paid by one of the partners on wagering transactions, companyld number be taken into companysideration. Reliance is placed in support of this companytention on Chittys Contract, p. 495, para. 908, which reads Inasmuch as betting is number in itself illegal, the law does number refuse to recognise a partnership formed for the purpose of betting. Upon the dissolution of such a partnership an account may be ordered. Each partner has a right to recover his share of the capital subscribed, so far as it has number been spent but he cannot claim an account of profits or repayments of amounts advanced by him which have actually been applied in paying the bets of the partnership. In support of this view, two decisions are cited. They are Thwaites v. Coulthwaite 2 and Saffery v. Mayer 3 . The first case has already been companysidered by us. There, Chitty, J., in giving a decree for account left open the question of the legality of certain transactions till it arose on the taking of the A.I.R. 1923 Nag. 48. 2 1896 1 Ch. 496. L.R. 1901 1 K.B. 11. account. Far from helping the appellant, the observations and the actual decision in that case support the respondents companytention. The reservation of the question of particular transactions presumably related only to the transactions prohibited by the Betting Act, 1853. Such of the transactions which were so prohibited by the Betting Act would be illegal and therefore the companytract of partnership companyld number operate on such transactions. The case of Saffery Mayer 1 related to a suit for recovery of money advanced by one person to another for the purpose of betting on horses on their joint account. The appellate Court held that by reason of the provisions of the Gaming Act, 1892, the action was number maintainable. This decision clearly turned upon the provisions of the Gaming, Act, 1892. Smith, R., observed that the plaintiff paid the money to the defendant in respect of a companytract rendered null and void and therefore it was number recoverable under the second limb of that section. The other Lord Justices also based their judgments on the express words of the Gaining Act, 1892. It will be also interesting to numbere that the Court of Appeal further pointed out that Chitty, J., in Thwaites Case 2 in deciding in the way he did omitted to companysider the effect of the provisions of the Gaming Act, 1892, on the question of maintainability of the action before him. The aforesaid passage in Chittys Contract must be understood only in the companytext of the provisions of the Gaming Act, 1892. The aforesaid discussion yields the following results 1 Under the companymon law of England a companytract of wager is valid and therefore both the primary companytract as well as the companylateral agreement in respect thereof are enforceable 2 after the enactment of the Gaming Act, 1845, a wager is made void but number illegal in the sense of being forbidden by law, and thereafter a primary agreement of wager is void but a companylateral agreement is enforceable 3 there was a companyflict on the question whether the second part of s. 18 of the Gaming Act, 1845, would companyer a case for the recovery of money or valuable thing alleged to be won upon L.R. 1901 1 K.B. 11. 2 1896 1 Ch. 496. any wager under a substituted companytract between the same parties the House of Lords in Hills Case, 1 had finally resolved the companyflict by holding that such a claim was number sustainable whether it was made under the original companytract of wager between the parties or under a substituted agreement between them 4 under the Gaming Act, 1892, in view of its wide and companyprehensive phraseology, even companylateral companytracts, including partnership agreements, are number enforceable 5 s. 30 of the Indian Contract Act is based upon the provisions of s. 18 of the Gaming Act, 1845, and though a wager is void and unenforceable, it is number forbidden by law and therefore the object of a companylateral agreement is number unlawful under s. 23 of the Contract Act and 6 partnership being an agreement within the meaning of s. 23 of the Indian Contract Act, it is number unlawful, though its object is to carry on wagering transactions. We, therefore, hold that in the present case the partnership is number unlawful within the meaning of s. 23 A of the Contract Act. Re. ii -Public Policy The learned Counsel for the appellant companytends that the companycept of public policy is very companyprehensive and that in India, particularly after independence, its companytent should be measured having regard to political, social and economic policies of a welfare State, and the traditions of this ancient companyntry reflected in Srutis, Smritis and Nibandas. Before adverting to the argument of the learned Counsel, it would be companyvenient at the outset to ascertain the meaning of this companycept and to numbere how the Courts in England and India have applied it to different situations. Cheshire and Fifoot in their book on Law of Contract , 3rd Edn., observe at page 280 thus The public interests which is designed to protect are so companyprehensive and heterogeneous, and opinions as to what is injurious must of necessity vary so greatly with the social and moral companyvictions, and at times even with the political views, of different judges, that it forms a treacherous and unstable 1 1921 2 K.B. 351. ground for legal decision These questions have agitated the Courts in the past, but the present state of the law would appear to be reasonably clear. Two observations may be made with some degree of assurance. First, although the rules already established by precedent must be moulded to fit the new companyditions of a changing world, it is numberlonger legitimate for the Courts to invent a new head of public policy. A judge is number free to speculate upon what, in his opinion, is for the good of the companymunity. He must be companytent to apply, either directly or by way of analogy, the principles laid down in previous decisions. He must expound, number expand, this particular branch of the law. Secondly, even though the companytract is one which prima facie falls under one of the recognized heads of public policy, it will number be held illegal unless its harmful qualities are indisputable. The doctrine, as Lord Atkin remarked in a leading case, should only be invoked in clear cases in which the harm to the public is substantially incontestable, and does number depend upon the idiosyncratic inferences of a few judicial minds In popular language the companytract should be given the benefit of the doubt . Anson in his Law of Contract states the same rule thus, at p. 216 Jessel, M. R., in 1875, stated a principle which is still valid for the Courts, when he said -You have this paramount public policy to companysider, that you are number lightly to interfere with the freedom of companytract and it is in reconciling freedom of companytract with other public interests which are regarded as of number less importance that the difficulty in these cases arises We may say, however, that the policy of the law has, on certain subjects, been worked into a set of tolerably definite rules. The application of these to particular instances necessarily varies with the companyditions of the times and the progressive development of public opinion and morality, but, as Lord Wright has said public policy, like any other branch of the Common Law, ought to be, and I think is, governed by the judicial use of precedents. If it is said that rules of public policy have to be moulded to suit new companyditions of a changing world, that is true but the same is true of the principles of the Common Law generally. In Halsburys Laws of England, 3rd Edn., Vol. 8, the doctrine is stated at p. 130 thus Any agreement which tends to be injurious to the public or against the public good is void as being companytrary to public policy It seems, however, that this branch of the law will number be extended. The determination of what is companytrary to the so-called policy of the law necessarily varies from time to time. Many transactions are upheld number which in a former generation would have been avoided as companytrary to the supposed policy of the law. The rule remains, but its application varies with the principles which for the time being guide public opinion. A few of the leading cases on the subject reflected in the authoritative statements of law by the various authors may also be useful to demarcate the limits of this illusive companycept. Parke, B., in Egerton v. Brownlow 1 , which is a leading judgment on the subject, describes the doctrine of public policy thus at p. 123 I Public policy is a vague and unsatisfactory term, and calculated to lead to uncertainty and error, when applied to the decision of legal rights it is capable of being understood in different senses it may, and does, in its ordinary sense, mean I political expedience, or that which is best for the companymon good of the companymunity and in that sense there may be every variety of opinion, according to education, habits, talents, and dispositions of each person, who is to decide whether an act is against public policy or number. To allow this to be a ground of judicial decision, would lead to the greatest uncertainty and companyfusion. It is the province of the statesman, and number the lawyer, to discuss, and of the Legislature to determine, what is best for the public good, and to provide for it by proper enactments. It 1s the province of the judge 1 4 H.L.C. 1, 123 10 E.R. 359,408. to expound the law only the written from the statutes the unwritten or companymon law from the decisions of our predecessors and of our existing Courts, from text writers of acknowledged authority, and upon the principles to be clearly deduced from them by sound reason and just inference number to speculate upon what is the best, in his opinion, for the advantage of the companymunity. Some of these decisions may have numberdoubt been founded upon the prevailing and just opinions of the public good for instance, the illegality of companyenants in restraint of marriage or trade. They have become a part of the recognised law, and we are therefore bound by them, but we are number thereby authorised to establish as law everything which we may think for the public good, and prohibit everything which we think otherwise. In Janson v. Driefontein Consolidated Mines, Ltd. 1 an action raised against British underwriters in respect of insurance of treasures against capture during its transit from a foreign state to Great Britain was resisted by the underwriters on the ground that the insurance was against public policy. The House of Lords rejected the plea. Earl of Halsbury, L.C., in his speech made weighty observations, which may usefully be extracted. The learned Lord says at page 491 In treating of various branches of the law learned persons have analysed the sources of the law, and have sometimes expressed their opinion that such and such a provision is bad because it is companytrary to public policy but I deny that any Court can invent a new head of public policy so a companytract for marriage brokerage, the creation of a perpetuity, a companytract in restraint of trade, a gaming or wagering companytract, or, what is relevant here, the assisting of the Kings enemies, are all undoubtedly unlawful things and you may say that it is because they are companytrary to public policy they are unlawful but it is because these things have been either enacted or assumed to be by the companymon law unlawful, and number because a judge or Court have a right to declare that such and such 1 1902 A.C. 484. things are in his or their view companytrary to public policy. Of companyrse, in the application of the principles here insisted on, it is inevitable that the particular case must be decided by a judge he must find the facts, and he must decide whether the facts so found do or do number companye within the principles which I have endeavoured to describe-that is, a principle of public policy, recognised by the law, which the suggested companytract is infringing, or is supposed to infringe. These observations indicate that the doctrine of public policy is only a branch of companymon law and unless the principle of public policy is recognised by that law, Court cannot apply it to invalidate a companytract. Lord Lindley in his speech at p. 507 pointed out that public policy is a very unstable and dangerous foundation on which to build until made safe by decision. A promise made by one spouse, after a decree nisi for the dissolution of the marriage has been pronounced, to marry a third person after the decree has been made absolute is number void as being against public policy see Fender v. St. John-Mildmay 1 . In that case Lord Atkin states the scope of the doctrine thus at p. 12 In popular language, following the wise aphorism of Sir George Jessel cited above, the companytract should be given the benefit of the doubt. But there is numberdoubt that the rule exists. In cases where the promise to do something companytrary to public policy which for short I will call a harmful thing, or where the companysideration for the promise is the doing or the promise to do a harmful thing a judge, though he is on slippery ground, at any rate has a chance of finding a footing But the doctrine does number extend only to harmful acts, it has to be applied to harmful tendencies. Here the ground is still less safe and more treacherous . Adverting to the observation of Lord Halsbury in Janson v. Driefontein Consolidated Mines Ltd. Lord Atkin companymented thus, at page 11 Lord Halsbury indeed appeared to decide that the categories of public policy are closed, 1 1938 A. C. 1. 2 1902 A.C. 484. and that the principle companyld number be invoked anew unless the case companyld be brought within some principle of public policy already recognised by the law. I do number find, however, that this view received the express assent of the other members of the House and it seems to me, with respect, too rigid. On the other hand, it fortifies the serious warning illustrated by the passages cited above that the doctrine should only be invoked in clear cases in which the harm to the public is substantially incontestable, and does number depend upon the idiosyncratic inferences of a few judicial minds . Lord Thankerton summarised his view in the following terms, at p. 23 In the first place, there can be little question as to the proper function of the Courts, in questions of public policy. Their duty is to expound, and number to expand, such policy. Thai does number mean that they are precluded from applying ail existing principle of public policy to a new set of circumstances, where such circumstances are clearly within the scope of the policy. Such a case might well arise in the case of safety of the State, for instance. But numbersuch case is suggested here. Further, the Courts must be watchful number to be influenced by their view of what the principle of public policy, or its limits, should be . Lord Wright, at p. 38, explains the two senses in which the words public policy are used In one sense every rule of law, either companymon law or equity, which has been laid down by the Courts, in that companyrse of judicial legislation which has evolved the law of this companyntry, has been based on companysiderations of public interest or policy. In that, sense Sir George Jessel, M. R., referred to the paramount public policy that people should fulfil their companytracts. But public policy in the narrower sense means that there are companysiderations of public interest which require the Courts to depart from their primary function of enforcing companytracts, and exceptionally to refuse to enforce them. Public policy in this sense is disabling Then the numberle Lord proceeds to lay down the following principles on which a judge should exercise this peculiar and exceptional jurisdiction 1 It is clear that public policy is number a branch of law to be extended 2 it is the province of the judge to expound the law only 3 public policy, like any other branch of the companymon law, is governed by the judicial use of precedents and 4 Courts apply some recognised principles to the new companyditions, proceeding by way of analogy and according to logic and companyvenience, just as Courts deal with any other rule of the companymon law. The learned Lord on the basis of the discussion of case law on the subject observes at p. 40 It is true that it has been observed that certain rules of public policy have to be moulded to suit number companyditions of a changing world but that is true of the principles of companymon law generally. I find it difficult to companyceive that in these days any new head of public policy companyld be discovered . The observations of the aforesaid Law Lords define the companycept of public policy and lay down the limits of its application in the modern times. In short, they state that the rules of public policy are well-settled and the function of the Courts is only to expound them and apply them to varying situations. While Lord Atkin does number accept Lord Halsburys dictum that the categories of public policy are closed, he gives a warning that the doctrine should be invoked only in clear cases in which the harm to the public is substantially incontestable, Lord Thankerton and Lord Wright seem to suggest that the categories of public - policy are well-settled and what the Courts at best can do is only to apply the same to new set of circumstances. Neither of them excludes the possibility of evolving a new bead of public policy in a changing world, but they companyld number companyceive that under the existing circumstances any such head companyld be discovered. Asquith, L. J., in Monkland v. Jack Barclay Ltd. 1 restated the law crisply at p. 723 The Courts have again and again said, that where a companytract does number fit into one or other of these 1 1951 1 All E.R. 714. pigeon-holes but lies outside this charmed circle, the companyrts should use extreme reserve in holding a companytract to be void as against public policy, and should only do so when the companytract is incontestably and on any view inimical to the public interest . The Indian cases also adopt the same view. A division bench of the Bombay High Court in Shrinivas Das Lakshminarayan v. Ram Chandra Ramrattandas observed at p. 20 It is numberdoubt open to the Court to hold that the companysideration or object of an agreement is unlawful on the ground that it is opposed to what the Court regards as public policy. This is laid down in section 23 of the Indian Contract Act and in India therefore it cannot be affirmed as a matter of law as was affirmed by Lord Halsbury in Janson v. Driefontein Consolidated Mines, Limited 1902 C. 484 at p. 491 that numberCourt can invent a new head of public policy, but the dictum of Lord Davey in the same case that public policy is always an unsafe and treacherous ground for legal decision may be accepted as a sound cautionary maxim in companysidering the reasons assigned by the learned Judge for his decision . The same view is companyfirmed in Bhagwant Genuji Girme Gangabisan Ramgopal 2 and Gopi Tihadi v. Gokhei Panda 3 . The doctrine of public policy may be summarized thus Public policy or the policy of the law is an illusive companycept it has been described as untrustworthy guide , variable quality , uncertain one , unruly horse , etc. the primary duty of a Court of Law is to enforce a promise which the parties have made and to uphold the sanctity of companytracts which form the basis of society, but in certain cases, the Court may relieve them of their duty on a rule founded on what is called the public policy for want of better words Lord Atkin describes that something done companytrary to public policy is a harmful thing, but the doctrine is extended number only to harmful cases but also to harmful tendencies this doctrine of public policy is only a branch of companymon law, and, I.L.R. 1920 44 Bom. 6. 2 I.L.R. 1941 Bom- 71. I.L.R. 1953 Cuttack 558. just like any other branch of companymon law, it is governed by precedents the principles have been crystallized under different heads and though it is permissible for Courts to expound and apply them to different situations, it should only be invoked in clear and incontestable cases of harm to the public though the heads are number closed and though theoretically it may be permissible to evolve a new head under exceptional circumstances of a changing world, it is advisable in the interest of stability of society number to make any attempt to discover new heads in these days. This leads us to the question whether in England or in India a definite principle of public policy has been evolved or recognized invalidating wagers. So far as England is companycerned, the passages from text-books extracted and the decisions discussed in companynection with the first point clearly establish that there has never been such a rule of public policy in that companyntry. Courts under the companymon law of England till the year 1845 enforced such companytracts even between parties to the transaction. They held that wagers were number illegal. After the passing of the English Gaming Act, 1845 8 9 Vict. c. 109 , such companytracts were declared void. Even so the Courts held that though a wagering companytract was void, it was number illegal and therefore an agreement companylateral to the wagering companytract companyld be enforced. Only after the enactment of the Gaming Act, 1892 55 Vict. c. 9 , the companylateral companytracts also became unenforceable by reason of the express words of that Act. Indeed, in some of the decisions cited supra the question of public policy was specifically raised and negatived by Courts See Thacker v. Hardy 1 Hyams v. Stuart King 2 and Michael Jeffrey Company v. Bamford 3 . It is therefore abundantly clear that the companymon law of England did number recognize any principle of public policy declaring wagering companytracts illegal. The legal position is the same in India. The Indian Courts, both before and after the passing of the Act 1 1878 L.R. 4 Q.B. 685. 2 1908 2 K.B. 696. 3 1949 2 All E. R. 452. 21 of 1848 and also after the enactment of the Contract Act, have held that the wagering companytracts are number illegal and the companylateral companytracts in respect of GI. them are enforceable. We have already referred to these in dealing with the first point and we need number A,, companyer the ground once again, except to cite a passage from the decision of the Judicial Committee in Ramloll Thackoorseydass v. Soojumnull Dhondmull 1 , which is directly in point. Their Lordships in companysidering the applicability of the doctrine of public policy to a wagering companytract observed at p. 350 We are of opinion, that, although, to a certain degree, it might create a temptation to do what was wrong, we are number to presume that the parties would companymit a crime and as it did number interfere with the performance of any duty, and as if the parties were number induced by it to companymit a crime, neither the interests of individuals or of the Government companyld be affected by it, we cannot say that it is companytrary to public policy. There is number a single decision after the above cited case, which was decided in 1848, up to the present day wherein the Courts either declared wagering companytracts as illegal or refused to enforce any companylateral companytract in respect of such wagers, on the ground of public policy. It may, therefore, be stated without any companytradiction that the companymon law of England in respect of wagers was followed in India and it has always been held that such companytracts, though void after the Act of 1848, were number illegal. Nor the legislatures of the States excepting Bombay made any attempt to bring the law in India in line with that obtaining in England after the Gaming Act, 1892. The Contract Act was passed in the year 1872. At the time of the passing of the Contract Act, there was a Central -Act, Act 21 of 1848, principally based on the English Gaming Act, 1845. There was also the Bombay Wagers Amendment Act, 1865, amending the former Act in terms analogous to those later enacted by the Gaming Act, 1892. Though the Contract 1 1848 4 M.I.A. 339. Act repealed the Act 21 of 1848, it did number incorporate in it the provisions similar to those of the Bombay Act number was any amendment made subsequent to the passing of the English Gaming Act, 1892. The legislature must be deemed to have had the knowledge of the state of law in England, and, therefore, we may assume that it did number think fit to make wagers illegal or to hit at companylateral companytracts. The policy of law in India has therefore been to sustain the legality of wagers. The history of the law of gambling in India would also show that though gaming in certain respects was companytrolled, it has never been absolutely prohibited. The following are some of the gambling Acts in India The Public Gambling Act 111 of 1867 The Bengal Public Gambling Act 11 of 1867 The Bombay Prevention of Gambling Act IV of 1887 Madhya Bharat Gambling Act LI of 1949 Madhya Pradesh Public -Gambling Act Madras Gaming Act 111 of 1930 The Orissa Prevention of Gambling Act XVII of 1955 the Punjab Public Gambling Act 111 of 1867 the Rajasthan Public Gambling Ordinance Ordinance XLVIII of 1949 and the U.P. Public Gambling Act. These Acts do number prohibit gaming in its entirety, but aim at suppressing gaming in private houses when carried on for profit or gain of the owner or occupier thereof and also gaming in public. Gaming without companytravening the provisions of the said Acts is legal. Wherever the State intended to declare a particular form of gaming illegal, it made an express statute to that effect See s. 29-A of the Indian Penal Code. In other respects, gaming and wagering are allowed in India. It is also companymon knowledge that horse races are allowed throughout India and the State also derives revenue therefrom. The next question posed by the learned Counsel for the appellant is whether under the Hindu Law it can be said that gambling companytracts are held to be illegal. The learned Counsel relies upon the observations of this Court in The State of Bombay v. R. M. D. Chamarbaugwala 1 . The question raised in that case was 1 1957 S.C.R. 874. whether the Bombay Lotteries and Prize Competition Control and Tax Amendment Act of 1952 extending the definition of prize companypetition companytained in s. 2 1 d of the Bombay Lotteries and Prize Competition Control and Tax Act of 1948, so as to include prize companypetition carried on through newspapers printed and published outside the State, was companystitutionally valid, It was companytended, inter alia, that the Act offended the fundamental right of the respondents, who were companyducting prize companypetitions, under Art. 19 1 g of the Constitution and also violated the freedom of inter- State trade under Art. 301 thereof This Court held that the gambling activities in their very nature and essence were extra companymercium and companyld number either be trade or companymerce within the meaning of the aforesaid provisions and therefore neither the fundamental right of the respondents under Art. 19 1 g or their right to freedom of interState trade under Art. 301 is violated. In that companytext Das, C. J., has companylected all the Hindu Law texts from Rig Veda, Mahabharata, Manu, Brihaspati, Yagnavalkya, etc., at pp. 922-923. It is unnecessary to restate them here, but it is clear from those texts that Hindu sacred books companydemned gambling in unambiguous terms. But the question is whether those ancient text-books remain only as pious wishes of our ancestors or whether they were enforced in the recent centu- ries. All the branches of the Hindu Law have number been administered by Courts in India only questions regarding succession, inheritance, marriage, and religious usages and institutions are decided according to the Hindu Law, except in so far as such law has been altered by legislative enactment. Besides the matters above referred to, there are certain additional matters to which the Hindu Law is applied to the Hindus, in some cases by virtue of express legislation and in others on the principle of justice, equity and good companyscience. These matters are adoption, guardianship, family relations, wills, gifts and partition. As to these matters also the Hindu Law is to be applied subject to such alterations as have been made by legislative enactments See Mullas Hindu Law, para. 3, p. 2. In other respects the ancient Hindu Law was number enforced in Indian Courts and it may be said that they became obsolete. Admittedly there, has number been a single instance in recorded cases holding gambling or wagering companytracts illegal on the ground that they are companytrary to public policy as they offended the principles of ancient Hindu Law. In the circumstances, we find it difficult to import the tenets of Hindu Law to give a numberel companytent to the doctrine of public policy in respect of companytracts of gaming and wagering. To summarize The companymon law of England and that of India have never struck down companytracts of wager on the ground of public policy indeed they have always been held to be number illegal numberwithstanding the fact that the statute declared them void. Even after the companytracts of wager were declared to be void in England, companylateral companytracts were enforced till the passing of the Gamina Act of 1892, and in India, except in the State of Bombay, they have been enforced even after the passing of the Act 21 of 1848, which was substituted by s. 30 of the Contract Act. The moral prohibitions in Hindu Law texts against gambling were number only number legally enforced but were allowed to fall into desuetude. In practice, though gambling is companytrolled in specific matters, it has number been declared illegal and there is numberlaw declaring wagering illegal. Indeed, some of the gambling practices are a perennial source of income to the State. In the circumstances it is number -possible to hold that there is any definite head or principle of public policy evolved by Courts or laid down by precedents which would directly apply to wagering companytracts. Even if it is permissible for Courts to evolve a new head of public policy under extraordinary circumstances giving rise to incontestable harm to the society, we cannot say that wager is one of such instances of exceptional gravity, for it has been recognized for centuries and has been tolerated by the public and the State alike. If it has any such tendency, it is for the legislature to make a law prohibiting such companytracts and declaring them illegal and number for this Court to resort to judicial legislation. Re. Point 3-Immorality The argument under this head is rather broadly stated by the learned Counsel for the appellant. The learned companynsel attempts to draw an analogy from the Hindu Law relating to the doctrine of pious obligation of sons to discharge their fathers debts and companytends that what the Hindu Law companysiders to be immoral in that companytext may appropriately be applied to a case under s. 23 of the Contract Act. - Neither any authority is cited number any legal basis is suggested for importing the doctrine of Hindu Law into the domain of companytracts. Section 23 of the Contract Act is inspired by the companymon law of England and it would be more useful to refer to the English Law than to the Hindu Law texts dealing with a different matter. Anson in his Law Of Contracts states at p. 222 thus The only aspect of immorality with which Court of Law have dealt is sexual immorality . Halsbury in his Laws of England, 3rd Edn., Vol. makes a similar statement, at p. 138 A companytract which is made upon an immoral companysideration or for an immoral purpose is unenforceable and there is numberdistinction in this respect between immoral and illegal companytracts. The immorality here alluded to is sexual immorality. In the Law of Contract by Cheshire and Fifoot, 3rd Edn., it is stated at p. 279 Although Lord Mansfield laid it down that a companytract companytra bonos mores is illegal, the law in this companynection gives numberextended meaning to morality but companycerns itself only with what is sexually reprehensible. In the book on the Indian Contract Act by Pollock and Mulla it is stated at p. 157 The epithet immoral points, in legal usage, to companyduct or purposes which the State, though disapproving them, is unable, or number advised, to visit with direct punishment. The learned authors companyfined its operation to acts which are companysidered to be immoral according to the standards of immorality approved by Courts. The case law both in England and India companyfines the operation of the doctrine to sexual immorality. To cite Only some instances settlements in companysideration of encubinage, companytracts of sale or hire of things to be used in a brothel or by a prostitute for purposes incidental to her profession, agreements to pay money for future illicit companyabitation, promises in regard to marriage for companysideration, or companytracts facilitating divorce are all held to be void on the ground that the object is immoral. The word immoral is a very companyprehensive word. ordinarily it takes in every aspect of personal companyduct deviating from the standard numberms of life. It may also be said that what is repugnant to good companyscience is immoral. Its varying companytent depends upon time, place and the stage of civilization of a particular society. In short, numberuniversal standard can be laid down and any law based on such fluid companycept defeats its own purpose. The provisions of s. 23 of the Contract Act indicate the legislative intention to give it a restricted meaning. Its juxtaposition with an equally illusive companycept, public policy, indicates that it is used in a restricted sense otherwise there would be overlapping of the two companycepts. In its wide sense what is immoral may be against public policy, for public policy companyers political, social and economic ground of objection. Decided cases and authoritative text-book writers, therefore, companyfined it, with every justification, only to sexual immorality. The other - limitation imposed on the word by the statute, namely, the companyrt regards it as immoral , brings out the idea that it is also a branch of the companymon law like the doctrine of public policy, and, therefore, should be companyfined to the Principles recognized and settled by Courts. -Precedents companyfine the said companycept only to sexual immora- lity and numbercase has been brought to our numberice where it has been applied to any head other than sexual immorality. In the circumstances, we cannot evolve a new head so as to bring in wagers within its fold. Lastly it is companytended by the learned Counsel for the appellant that wager is extra-commercium and therefore there cannot be in law partnership for wager within the meaning of s. 4 of the Partnership Act for partnership under that section is relationship between persons who have agreed to share the profits of a business. Reliance is placed in respect of this companytention on the decision of this Court in The State of Bombay v. R. M. D. Chamarbaugwala 1 . This question was number raised in the pleadings. No issue was framed in respect of it. No such case was argued before the learned Subordinate Judge or in the High Court number was this point raised in the application for certificate for leave to appeal to the Supreme Court filed in the High Court. Indeed, the learned Advocate appearing for the appellant in the High Court stated that his client intended to raise one question only, namely, whether the partnership formed for the purpose of carrying on a business in differences was illegal within the meaning of s. 23 of the Contract Act. Further this plea was number specifically disclosed in the statement of case filed by the appellant in this Court. If this companytention had been raised at the earliest point of time, it would have been open to the respondents to ask for a suitable amendment of the plaint to sustain their claim. In the circumstances, we do number think that we companyld with justification allow the appellant to raise this new plea for the first time before us, as it would cause irreparable prejudice to the respondents.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 206 of 1954. Appeal from the judgment and decree dated March 9, 1951, of the Orissa High Court in- Appeal from Original decree No. 14 of 1946, arising out of the judgment and decree dated January 31, 1946, of the Court of Subordinate Judge at Sambalpur in Title Suit No. 16 of 1944. K. Jha, Rameshwar Nath, S. N. Andley and J. B. Dadachanji, for the appellant. C. Issacs and R. Patnaik, for the respondents. 1959. April 27. The Judgment of the Court was delivered by K. DAS, J.-This appeal on a certificate granted by the High Court of Orissa is from the judgment and decree of the said High Court dated March 9, 1951, by which it substantially affirmed the decision of the learned Subordinate Judge of Sambalpur in Title Suit No. 16 of 1944 except for a modification of the decree for damages awarded by the latter. Two questions of law arise in this appeal, one relating to the interpretation of s. 32, sub-s. 5 and the other to S. 50 of the Indian Evidence Act I of 1872 , hereinafter referred to as the Evidence Act. The material facts relating to the appeal are susceptible of a-simple and companycise statement. Three persons Nimai Charan Misra, Lakshminarayan Misra and Baikuntha Pati brought a suit for a declaration of their title to and recovery of possession of certain properties details whereof are number necessary for our purpose. This suit was numbered Title Suit 16 of 1944 in the companyrt of the Subordinate Judge of Sambalpur. The claim of the plaintiffs, number respondents before us, was founded on the following pedigree- Sankarsan Balaram Bhubana Baidyanath Raghunath Purushottam Satyabhama Lokanath Haripriya alias Srihari died 1942 2nd wife Satyananda died 1902 Natabar Deft. 1 Janardan Devendra Deft. 3 Radha Krushna Dolgovind Ramhari Deft. 4 Deft. 5 Deft. 6 Must. Ahalya Mst. Brindabati Mst. Malabati dead married dead married. dead married. Lakhan Pati. Raghumani. Mandhata Misra. Satyabadi Dasarath Baikuntha Nimai Lakshminarayanm dead Deft.8 Plaintiff3 Plaintiff1 Plaintiff2 given in adoption in another family . The last male owner was Satyananda who died unmarried sometime in 1902-1903, and his mother Haripriya succeeded to the estate. She lived till 1942 but in 1916 she had sold a portion of the property to one Indumati, daughter of Dharanidhar Misra plaintiffs witness number 4 and some of the reversioners, namely, Natabar and Janardan, who were agnates of Haripriyas husband Lokenath Parichha, brought a suit challenging the alienation. This suit was Suit No. 31 of 1917 in the companyrt of the Subordinate Judge, Sambalpur. The suit was decreed on August 31, 1918, and the alienation was declared to be without legal necessity and number binding on the reversion after the death of Haripriya. In 1929 was passed the Hindu Law of Inheritance Amendment Act II of 1929 which inter alia gave to a sisters -son a place in the order of Mitakshara succession higher than the agnates before the amending Act a sisters son ranked as a bandhu, but under it he succeeded next after the sister. The question whether a half-sister was entitled to get the benefit of the amending Act gave rise to a difference of opinion, but the Privy Council held in 1942, settling the difference then existing between the various High Courts, that the term I sister included a half-sister but a full sister and a half-sister did number take together and the latter took only in default of the full sister. See Mst. Sahodra v. Ram Babu 1 . The plaintiffs-respondents claimed on the strength of the pedigree which they set up that they were sons of the half-sister of Satyanand and therefore came before the agnates. The suit was companytested by some of the defendants who were agnates of Lokenath Paricha and of whom the present appellant was one. The companytesting defendants challenged the companyrectness of the pedigree alleged by the plaintiffs- respondents and their main case was that Ahalya and Malabati were -not the daughters of Lokenath Parichha but were daughters of Baidyanath Misra, father of Haripriya. The relevant pedigree which the appellant set up was- 1 1942 L.R. 69 I.A. I45. Baidyanath Misra Haripriya Bisseswar AliaJ Malabati died on Misra Laksh Pati Mandhata 6-4-1942 Dayasagar Satyanand Sushila P. W. 3 died in 1903 Dasarathi Baikuntha Plff. 3 Nimai Lakshmi- Plff.1 narayan. Plff. 2. As the High Court has put it, the essential companytroversy between the parties centred round the question if the plaintiffs-respondents were the sons of the daughters of Lokenath Parichha by his first wife Satyabhama. On this question the parties gave both oral and documentary evidence. On a companysideration of that evidence the learned Subordinate Judge held that they were the sons of the daughters of Lokenath Parichha and on that finding the suit was decreed. There was an appeal to the High Court, and it affirmed the finding Of the learned Subordinate Judge. The High Court relied on Ex. 1, a petition dated November 2, 1917, which Satyabadi on his own behalf and on behalf of his brothers Baikunth Pati and Dasarath Pati had filed in Suit No. 31 of 1917 this petition companytained a pedigree which showed that Ahalya, Brindabati, and Malabati were daughters of Lokenath Parichha by his first wife and Satyabadi, Baikunth and Dasarath were the sons of Ahalya. The admissi- bility of this document was challenged on behalf of the appellant, but the learned Judges of the High Court held that the document was admissible under s. 32 5 of the Evidence Act. The companytention before us is that the document was number so admissible, and this is one of the questions for decision before us. As to the oral evidence, Narasimham, J., held that the testimony given by three of the witnesses of the plaintiffs- respondents, namely, Janardan Misra plaintiffs witness number 2 , Sushila Misrain plaintiffs witness number 3 and Dharanidhar Misra plaintiffs witness number 4 was admissible under s. 50 of the Evidence Act, and he relied on that testimony in support of the pedigree set up by the plaintiffs-respondents. The learned Chief Justice relied on the evidence of Dharanidbar Misra which be held to be admissible but with regard to the. other two witnesses, he said- With regard to the other two witnesses relied on by the plaintiffs namely that of P. Ws. 2 Janardan Misra, aged 62 and 3 Susila Misrani, aged 43 knowledge of relevant facts as to relationships can seldom be attributed to them. Their evidence, though true, and otherwise acceptable, must be based upon their having heard the declarations of such members of the family as were their companytemporaries or upon the tradition or reputation as to family descent handed down from generation to generation and recognised and adopted by the family generally. This may partly, if number wholly, be based upon companyduct within the meaning of section 50, such as treating and recognising the mothers of the plaintiffs as Lokenaths daughters, and the plaintiffs as his daughters sons. They, judged from their respective ages, companyld number be companysidered to have direct knowledge of the matters in issue. Scanning their evidence closely, I find that they have in numberway deposed about such companyduct of the members of the family of Lokenatb as companyld be attributed to the knowledge or belief or companysciousness of those who had special means of knowledge of the relationships or that the relationship was recognised and adopted by the family generally. In the circumstances, I entertain some doubt as to the acceptability of their statements in evidence. On behalf of the appellant, it has been companytended that the testimony of numbere of the aforesaid three witnesses fell within the purview of s. 50 of the Evidence Act and the High Court was in error in admitting and accepting that evidence or any part thereof, and according to learned companynsel for the appellant, the whole of it was hearsay pure and simple- some of it being even second or third-hand hearsay. Thus the second question for our companysideration is if the testi- mony of the witnesses mentioned above or of any of them, is admissible evidence within the meaning of s. 50 of the Evidence Act. We proceed to companysider the second question first. The Evidence Act states that the expression facts in issue means and includes any fact from which either by itself or in companynection with other facts the existence, number- existence, nature or extent of any right, liability or disability asserted or denied in any suit or proceeding necessarily follow evidence means and includes 1 all statements which the Court permits or requires to be made before it by witnesses in relation to matters of fact under enquiry and 2 all documents produced for the inspection of the Court. It further states that one fact is said to be relevant to another when the one is companynected with the other in any one of the ways referred to in the provisions of the Evidence Act relating to the relevancy of facts. Section 5 of the Evidence Act lays down that evidence may be given in any suit or proceeding of the existence or number-existence of every fact in issue and of such other facts as are declared to be relevant and of numberothers. It is in the companytext of these provisions of the Evidence Act that we have to companysider s. 50 which occurs in Chapter 11, headed Of the Relevancy of Facts Section 50, in so far as it is relevant for our purpose, is in these terms- S. 50. When the Court has to form an opinion as to the relationship of one person to another, the opinion, expressed by companyduct, as to the existence of such relationship, of any person who, as a member of the family or otherwise, has special means of knowledge on the subject, is a relevant fact On a plain reading of the section it is quite clear that it deals with relevancy of a particular fact. It states in effect that when the Court has to form an opinion as to the relationship of one person to another the opinion expressed by companyduct as to the existence of such relationship of any person who has special means of knowledge on the subject of that relationship is a relevant fact. The two illustrations appended to the section clearly bring out the true scope and effect of the section. It appears to us that the essential requirements of the section are- I there, must be a case where the companyrt has to form an opinion as to the relationship of one person to another 2 in such a,case, the opinion expressed by companyduct as to the existence of such relationship is a relevant fact 3 but the person whose opinion expressed by companyduct is relevant must be a, person who as a member of the family or otherwise has special means of knowledge on the particular subject of relationship in other words,the person must fulfil the companydition laid down in the latter part of the section. If the person fulfils that companydition, then what is relevant is his opinion expressed by companyduct. Opinion means something more than more retailing of gossip or of hearsay it means judgment or belief, that is, a belief or a companyviction resulting from what one thinks on a particular question. Now, the belief or companyviction may manifest itself in companyduct or behaviour which indicates the existence of the belief or opinion. What the section says is that such companyduct or outward behaviour as evidence of the opinion held is relevant and may, therefore, be proved. We are of the view that the true scope and effect of section 50 of the Evidence Act has been companyrectly and succinctly put in the following observations made in Chandu Lal Agarwala v. Khalilar Rahman 1 - It is only opinion as expressed by companyduct which is made relevant. This is how -the companyduct companyes in. The offered item of evidence is the companyduct, but what is made admissible in evidence is the opinion, the opinion as expressed by such companyduct The offered item of evidence thus only moves the Court to an intermediate decision its immediate effect is only to move the Court to see if this companyduct establishes any I opinion of the person, whose companyduct is in evidence, as to the relationship in question. In order to enable the Court to infer the opinion , the companyduct must be of a tenor which cannot well be supposed to have been willed without the inner existence of the I opinion. When the companyduct is of such a tenor, the Court only gets to a relevant piece of evidence, namely, the opinion of a person. It still remains for the Court to weigh such evidence and companye to its own opinion as I.L.R. 1942 2 Cal. 299, 309. to the factum probandum-as to the relationship in question. We also accept as. companyrect the view that s. 50 does number make evidence of mere general reputation without companyduct admissible as proof of relationship Lakshmi Reddi v. Venkata Reddi 1 . It is necessary to state here that how the companyduct or external behaviour which expresses the opinion of a person companying within the meaning of s. 50 is to be proved is number stated in the section. The section merely says that such opinion is a relevant fact on the subject of relationship of one person to another in a case where the companyrt has to form an opinion as to that relationship. Part 11 of the Evidence Act is headed On Proof . Chapter III thereof companytains a fascicule of sections relating to facts which need number be proved. Then there is Chapter IV dealing with oral evidence and in it occurs s. 60 which says inter alia - S. 60. Oral evidence must, in all cases whatever, be direct that is to say- if it refers to a fact which companyld be seen, it must be the evidence of a witness who says he saw it if it refers to a fact which companyld be heard, it must be the evidence of a witness who says he heard it if it refers to a fact which companyld be perceived by any other sense or in any other manner, it must be the evidence of a witness who says he perceived it by that sense in that manner if it refers to an opinion or to the grounds on which that opinion is held, it must be the evidence of the person who holds that opinion on those grounds. If we remember that the offered item of evidence under s. 50 is companyduct in the sense explained above, then there is numberdifficulty in holding that such companyduct or outward behaviour must be proved in the manner laid down in s. 60 if the companyduct relates to something which can be seen, it must be proved by the person who saw it if it is something which can be heard, then it must be proved by the person who heard it and so on. The companyduct must be of the A.I.R. 1937 P.C. 201. person who fulfils the essential companyditions of s. 50, and it must be proved in the manner laid down in the provisions relating to proof. It appears to us that that portion of s. 60 which provides that the person who holds an opinion must be called to prove his Opinion does number necessarily delimit the scope of S. 50 in the sense that opinion expressed by companyduct must be proved only by the person whose companyduct expresses the opinion. Conduct, as an external perceptible fact, may be proved either by the testimony of the person himself whose opinion is evidence under s. 50 or by some other person acquainted with the facts which express such opinion, and as the testimony must relate to external facts which companystitute companyduct and is given by persons personally acquainted with such facts, the testimony is in each case direct within the meaning of s. 60. This, in our opinion, is the true inter-relation between s. 50 and s. 60 of the Evidence Act. In Queen Empress v. Subbarayan 1 Hutchins, J., said - That proof of the opinion, as expressed by companyduct, may be given, seems to imply that the person himself is number to be called to state his own opinion, but that, when he is dead or cannot be called, his companyduct may be proved by others. The section appears to us to afford an exceptional way of proving a relationship, but by numbermeans to prevent any person from stating a fact of which he or she has special means of knowledge. While we agree that s. 50 affords an exceptional way of proving a relationship and by numbermeans prevents any person from stating a fact of which he or she has special. means of knowledge, we do number agree with Hutchins, J., when he says that the section seems to imply that the person whose opinion is a relevant fact cannot be called to state his own opinion as expressed by his companyduct and that his companyduct may be proved by others only when he is dead or cannot be called. We do number think that s. 50 puts any such limitation. Let us number apply the tests indicated above to the testimony of the two witnesses, Janardan Misra and 1 1885 I.L.R. 9 Mad. 9, 11. Dharanidhar Misra. As to Sushila Misrain, she was aged about 43 when she gave evidence in 1946. It is unnecessary to companysider in detail her evidence, because if the evidence of the other two older witnesses be admissible, that would be sufficient to support the finding arrived at by the companyrts below another evidence would also be admissible on the same criteria as the evidence of the other two witnesses. The first question which we must companysider is if Janardan Misra and Dharanidhar Misra had special means of knowing the disputed relationship. Janardan Misra was aged about 62 in 1946, and he was related to the family of Baidyanath Misra. Kashi Nath Misra was his grand-father and was a brother of Baidyanath Misra. Obviously, therefore, Janardan Misra had special means of knowing the disputed relationship, being related to Baidyanath and therefore to Haripriya, who was the second wife of Lokenath. He said in his evidence that he knew Lokenath Parichha, had seen his first wife Satyabhama and remembered the marriage of Haripriya with Lokenath Parichha. Obviously, therefore, he fulfilled the companydition of special knowledge. He further said that he attended the marriage of Malabati, daughter of Lokenath, when Lokenath was living. That marriage took place in the house of Lokenath. He also said that he was present when the first two daughters of Malabati were married and also at the time of the Upanayan ceremonies of plaintiffs I and 2. According to the witness, Shyam Sundar Pujari, a son of a sister of Lokenath, acted as a maternal uncle at the time of the marriage of the eldest daughter of Malabati and Dayasagar Misra carried Radhika, second daughter of Malabati, at the time of her marriage. The question is whether these statements of Janardan Misra as to his companyduct are admissible under s. 50, Evidence Act. Learned companynsel for the respondent has companytended before us that even apart from s. 50, the evidence of Janardan Misra is direct evidence of facts which he saw and which should be treated as .directly proving the relationship between Lokenath and his daughters. We do number think that learned companynsel for the respondent is right in his submission that Janardans evidence directly proves the relation between Lokenath and his alleged daughters, Abalya, Brindabati and Malabati. Janardan does number say that he was present at the birth of any of these daughters. What be says is that he was present at the marriage of Malabati which took place when Lokenath was living and in Lokenaths house he was also present at the marriages of the first two daughters of Malabati and also at the time of the Upanayan ceremonies of plaintiffs I and 2. This evidence, in our opinion, properly companyes within s. 50, Evidence Act it shows the opinion of Janardan Misra as expressed by his companyduct, namely, his attending the marriage of Malabati as daughter of Lokenath and his attending the marriages and Upanayan ceremonies of the grandchildren of Lokenath. We do number think that it can be suggested for one moment that Janardan Misra attended the marriage and other ceremonies in the family as a mere casual invitee. He must have been invited as a relation of the family and unless he believed that Malabati was a daughter of Lokenath and the others were grand-children of Lokenath to whom the witness was related, he would number have said that he attended those ceremonies as those of the children and grand-children, of Lokenath. This, in our opinion, is a reasonable inference from the evidence and if that is so, then the evidence of Janardan Misra was clearly evidence which showed his belief as expressed by his companyduct on the subject of the relationship between Lokenath and his daughters and Lokenath and his grandchildren. Janardan also said that one Shyamsundar Pujari acted as maternal uncle at the time of the marriage of the eldest daughter of Malabati. There is some evidence in the record that Shyamsundar Pujari was son of Lokenaths sister. This was, however, disputed by the appellant. The High Court has number recorded any finding on the relation of Shyamsundar Pujari to Lokenath. If it were proved that Shyamsundar was a son of Lokenaths sister, he would have special means of knowledge as a relation of the family and his companyduct at the time of the marriage of Malabatis daughter would also be admissible under s. 50. But in the absence of any finding as to any special means of knowledge on the part of Shyamsundar, the latters companyduct will number be admissible under s. 50. We need number say anything more about Shyamsundar, as the High Court has number based its finding on the companyduct of Shyamsundar. The same criteria apply to the evidence of Dharanidhar Misra, who was aged 96 at the time when he gave evidence. He was the maternal uncle of Janardan Misra. Dharanidhars evidence showed that he knew Lokenath Parichha and his two wives, Satyabhama and Haripriya. He also had special means of knowing the disputed relationship, though he was number directly related to Lokenath. He said that Lokenath was two years older than him and the witness attended the marriages of Radhika and Sarjoo and the thread ceremonies of Lakshminarayan and Nimai. The witness further added that though he did number remember if he was invited to the marriage of Mandhatas daughters, he was invited to the feasts which followed the marriage. He said that the feasts took place in the house of Mandhata and he attended the gansana and marriage feasts of Mandhatas daughters. The same criteria which make the evidence of Janardan Misra admissible under s. 50 also make the evidence of Dharanidhar Misra admissible under the same section. We may in this companynection refer to one of our own decisions, Sitaji v. Bijendra Narain Choudhary wherein the following observations were made A member of the family can speak in the witness-box of what he has been told and what he has learned about his own ancestors, provided what he says is an expression of his own independent opinion even though it is based on hearsay derived from deceased, number living, persons and is number merely repetition of the hearsay opinion of others, and provided the opinion is expressed by companyduct. His sources of A.I.R 1954 S.C. 601. information and the time at which he acquired the knowledge for example, whether before the dispute or number would affect its weight but number its admissibility. This is therefore legally admissible evidence which, if believed, is legally sufficient to support the finding . It is true that Dharanidhar Misra was number directly related to the family of Lokenath. He was, however, distantly related to Haripriya. He was a friend of Lokenath Parichha and lived in the same neighbourhood. His evidence showed that he knew him and the members of his family quite well. That being the position, his evidence that he attended the marriage ceremonies and the Upanayan ceremonies of several members of the family undoubtedly showed his opinion as expressed by his companyduct. We are accordingly of the view that the evidence of both Janardan Misra and Dharanidhar Misra was admissible under s. 50 and the learned Judges of the High Court companymitted numbererror of law in admitting and companysidering that evidence. We are companycerned here with the question of admissibility only. As to what weight should be given to their evidence was really a matter for the companyrts below and both the learned Chief Justice and Narasimham, J., accepted the testimony of Dharanidhar Misra and Narasimham, J., further relied on the testimony of Janardan Misra also. We number proceed to a companysideration of the first question, namely, the admissibility of the document Ext. 1. The High Court has held the document to be admissible under sub- section 5 of s. 32 of the Evidence Act. We must first read s. 32 5 S. 32. Statements, written or verbal, of relevant facts made by a person who is dead, or who cannot be found, or who has become incapable of giving evidence, or whose attendance cannot be procured without an amount of delay or expense which, under the circumstances of the case, appears to the Court unreasonable, are themselves relevant facts in the following cases- 1 2 3 4 When the statement relates to the existence of any relationship by blood, marriage or adoption between persons as to whose relation-ship by blood, marriage or adoption the person making the statement had special means of knowledge, and when the statement was made before the question in dispute was raised. 6 7 8 Now, four companyditions must be fulfilled for the application of sub-s. 5 of s. 35 firstly, the statements, written or verbal, of relevant facts must have been made by a person who is dead or cannot be found, etc., as mentioned in the initial part of the section secondly, the statements must relate to the existence of any relationship by blood, marriage or adoption thirdly, the person making the statement must have special means of knowledge as to the relationship in question and lastly, the statements must have been made before the question in dispute was raised. There is numberserious difficulty in the present case as to the first two companyditions. Exhibit I companytained a pedigree which showed that Lokenath had three daughters by his first wife, the daughters being Ahalya, Brindabati and Malabati it also showed that Ahalya had three sons Satyabadi, Baikuntha and Dasarath, of whom Baikuntha was one of the plaintiffs in the present suit and the other two plaintiffs Nimai and Lakshminarayan were shown as sons of Malabati. Exhibit I was signed by Satyabadi on his own behalf and on behalf of his brothers Baikuntha and Dasarath. Satyabadi is number dead. So far as Satyabadi is companycerned, there can be numberdoubt that the first two companyditions for the application of sub-s. 5 of s. 32 are fulfilled. It has been companytended that as Dasarath and Baikuntha are alive Baikuntha being one of the plaintiffs and as the statement was the joint statement of three persons of whom one alone is dead, the first and preliminary companydition necessary for the application of s. 32 is number fulfilled. We do number think that this companytention is companyrect, and we are of the view that the position is companyrectly stated in Chandra Nath Roy v. Nilamadhab Bhattacharjee 1 that was a case in which the statements were recitals as to a pedigree and were companytained in a patta executed by three sisters, two of whom were dead and it was pointed out that the statement in the patta was as much the statement of the sisters who were dead as of the sister who was alive. In the case before us the statements as to pedigree in Ex. I were really the statements of Satyabadi, who signed for self and on behalf of his brothers. Assuming, however, that the statements were of all the three brothers, they were as much statements of Satyabadi as of the other two brothers who are alive. We, therefore, see numberdifficulty in treating the statements as to pedigree in Ex. I as statements of a dead person as to the existence of a relationship by blood between Lokenath and his daughters Ahalya, Brindabati and Malabati-the relationship which is in dispute number. The more important point for companysideration is if the statements as to pedigree in Ex. I were made, to use the- words of sub-s. 5 , before the question in dispute was raised. The High Court held that the statements were made ante litem motam. Learned companynsel for the appellant has very strongly companytended before us that the High Court took an erroneous view in this matter. Let us first see the circumstances in which Ex. I was filed and dealt with in Suit No. 31 of 1917. We have said earlier what that suit was about. It was a suit brought by some of the reversioners for a declaration that the alienation made by Haripriya in favour of Indumati was without legal necessity and, therefore, number binding on the reversion after the death of Haripriya. The suit was filed on August 27, 1917. On November 2, 1917, certain other persons made an application to be added as parties to the suit on the footing that they had the same interest in the suit as the plaintiffs. That application was disposed of by the learned Subordinate Judge by the following order-- In a suit like the present, it is number necessary 1 1898 I.L.R. 26 Cal. 236. that all the reversioners should be made parties. So I reject the petition. Exhibit I was filed on November 5, 1917. In that petition Satyabadi alleged The applicants are the legal claimants to inherit the properties left by Lokenath the applicants therefore beg that they may kindly be made company defendants . It was further alleged that the plaintiffs of that suit had numberlegal right over the share in dispute, and this was followed by a pedigree given in para. IV of the petition. This petition Ex. 1 was put up on November 27, 1917, and the learned Subordinate Judge disposed of the petition by the following order- The petition of Satyabadi Pati and others was put up in the presence of the plaintiffs pleader. He objects to the same. The petition is, therefore, rejected. Ultimately, the suit was decreed on August 31, 1918, on the finding that the alienation by Haripriya was without legal necessity and did number bind the reversion after her death. The learned Judges of the High Court took the view that in Suit No. 31 of 1917 numberdispute arose as to the alleged relation between Lokenath on one side and Ahalya, Brindabati and Malabati on the other. The dispute in that suit was about the validity of the alienation made by Haripriya and the suit having been filed by some of the reversioners on behalf of the reversion, numberissue was raised or companyld be raised as to whether Lokenath had any daughters by his first wife, Such an issue was number relevant to the suit and furthermore numberody companyld anticipate in 1917 that the sons of a sister or half-sister would be preferential heirs in the order of Mitakshara succession. They, therefore, held that the statements in Ex. 1 were ante litem motam and admissible under sub-s. 5 of s. 32, Evidence Act. On behalf of the appellant it has been argued that for a declaratory decree in respect of an alienation made by a Hindu widow or other limited heir, the right to sue rests in the first instance with the next reversioner and the reversioner next after him is number entitled to sue except in some special circumstances and therefore the question as to who the next reversioner was arose in the suit of 1917 and Ex. I did raise a dispute as to who the last male owner was Lokenath or Satyanand-and also showed that there was a dispute if the plaintiffs of that suit were entitled to the property in dispute there. The existence of such a dispute, it has been argued, affected the statements in Ex. I and what Satyabadi said therein were number the natural effusions of a party who must know the truth and who speaks upon an occasion when his mind stands in an even position without any temptation to exceed or fall short of the truth as per Lord Chancellor Eldon in Whitelocke v. Baker 1 . Learned companynsel has also relied on the decision in Naraini Kuar v. Chandi Din 2 where it was held that s. 32 5 did number apply to statements made by interested parties in denial, in the companyrse of litigation, of pedigrees set up by their opponents. We do number think that in Suit No. 31 of 1917 any question as to the relationship of Lokenath with Ahalya, Brindabati and Malabati arose at all. It is to be remembered that even according to the pedigree set up by the appellant one of the plaintiffs is a son of Ahalya and two others are sons of Malabati. What is number in dispute is whether Ahalya and Malabati were daughters of Lokenath Parichha. That is a question which did Dot at all arise for companysideration in Suit No. 31 of 1917 number did it arise in the proceedings which the application of Satyabadi Ex. 1 gave rise to. Prima facie, there is numberhing to show that a dispute as to the relationship of Lokenath with Ahalya and Malabati arose at any stage prior to or in the companyrse of the proceedings which arose out of Ex. I that would be sufficient to discharge the onus of proving that the statements in Ex. 1 were ante litem motam. Natabar, one of the plaintiffs in the suit of 1917, who might have given evidence of any such dispute if it existed, said numberhing about it. We have referred to the circumstances in which Ex. I was filed and disposed of. It is true that the order of the learned Subordinate Judge rejecting the -petition Ex. 1 is somewhat cryptic and it does number show what objection the 7 1807 13 ves. 510, 514. 8 1886 I.L.R. 9 All. 467. plaintiff of that suit took and on what ground the learned Subordinate Judge rejected the petition. If, however, the various orders made by the learned Subordinate Judge, particularly the orders dated November 2, 1917, and November 27, 1917, to which we have earlier made reference are examined, it seems clear to us that the learned Subordinate Judge was proceeding on the footing that in a suit of that nature it was number necessary to make all the reversioners parties, because the reversioners who brought the suit represented the entire body of reversioners. From the judgment passed in the suit Ex. Cl it does number appear that the question as to who the next reversioners were was at all gone into. That may be due to the circumstance, pointed out by the High Court, that Purushottam, uncle of Janardan and Natwar, was then alive. He was admittedly then the nearest reversioner, but as he did number join as a plaintiff he was made a proforma defendant. The nearest reversioner having been added as a party defendant in the suit of 1917, numberquestion of title arose in that suit as between the reversioners inter se. Such a question of title was wholly foreign to the nature of that suit. Nor, do we find anything in the judgment, Ex. Cl, to show that it was ever suggested in that suit that the last male owner was number Satyanand. The sons of the half-sister of Satyanand were number preferential heirs at the time and we agree with the learned Judges of the High Court that numberquestion arose or companyld have arisen in that suit as to the. relation between Lokenath on one side and Ahalya and Malabati on the other. That being the position, the statements as to pedigree company- tained in Ex. 1 were made before the precise question in dispute in the present litigation had arisen. It has next been argued by learned companynsel for the appellant that in admitting Ex. I under s. 32 5 the companyrts below assumed that Satyabadi had special means of knowledge as to the relation between Lokenath and his alleged daughters Ahalya and Malabati. The argument has been that unless it is assumed that Satyabadi is the grand-son of Lokenath, he can have relationship. Learned companynsel for the appellant has referred us to the decision in Subbiah Mudaliar v. Gopala Mudaliar 1 where it was held that for a statement in a former suit to be admissible under s. 32 5 the fact that the person who made the statement had special means of knowledge must be shown by some independent evidence, otherwise it would be arguing in a circle to hold that the document itself proves the relation and therefore shows special means of knowledge. In Hitchins v. Eardley 2 the question of the legitimacy of the declarant was in issue and the same question was necessary to be proved in order to admit his declarations. That was a jurv case and the ques- tion relating to the admissibility of evidence being a question of law had to be determined by the Judge but the same question being the principal question for decision in the case had to be determined by the jury at the companyclusion of the trial. In the difficulty thus presented, prima facie evidence only was required at the time of admission. We do number think that any such difficulty presents itself in the case under our companysideration. As to Satyabadis special means of knowledge, we have in this case the evidence of Janardan. Misra and Dharanidhar Misra, which evidence independently shows that Satyabadi was the grand-son of Lokenath, being the son of his daughter, Ahalya. It may be stated here also that it was admitted that Ahalya was Satyabadis mother, and that would show that Satyabadi had special means of knowledge as to who his mothers father was. Therefore, we agree with the High Court that Ex. I fulfilled all the companyditions of s. 32 5 , Evidence Act and was admissible in evidence. We have already said that it is number for us to companysider what weight should be given to the oral evidence of Janardan and Dharanidhar or to the statements in Ex. 1. The companyrts below have companysidered that evidence and have assessed it. We do number think that we shall be justified in going behind that assessment. Learned companynsel for the appellant wished also to A.I.R. 1936 Mad. 808. 2 1871 L.R. 2 P. D. 248. argue the point that the Privy Council decision in Mst. Sahodras case 1 was wrong and that a halfsister was number entitled to get the benefit of the amending Act of 1929. The Privy Council decision was given at a time when it was binding on the companyrts in India and it settled differences of opinion which then existed in the different High Courts. That decision was taken as settling the law on the subject and on the faith of that decision a half-sister has been held in subsequent cases to be entitled to the benefit of the Amending Act. The High Court dealt with the case in 1951 after the Constitution had companye into force and the Privy Council jurisdiction in Indian appeals had ceased. No point was taken on behalf of the appellant in the High Court that the Privy Council decision should be reopened and the question of the right of a half-sister re-examined.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 284 of 1958. Appeal from the judgment and order dated April 21, 1956, of the former Judicial Commissioners Court, Rewa, in Misc. Civil Writ No. 27 of 1956. Naunit Lal, for the appellant. Bhagwan Das Jain, for respondent No. 1. 1959. April 21. The Judgment of the Court was delivered by SARKAR, J.-This appeal arises out of an application for a writ of certiorari and involves questions of interpretation of the Motor Vehicles Act, 1939 4 of 1939 , by. which grants of permits to run stage carriages and all matters companynected therewith are governed. The appellant was the holder of a permit to run a stage carriage on a stretch of the public highway called the Rewa- Singrauli route, in the State of Vindhya Pradesh which is number merged in the State of Madhya Pradesh. That permit was due to expire on December 11, 1955, and so on September 12, 1955, he made an application for its renewal for a further period. The respondent Anant Prasad who will be referred to as the respondent, made a representation against the renewal of the appellants permit. He also applied for the grant of the permit to himself. On December 9, 1955, the State Transport Authority, Vindhya Pradesh, made an order in the following terms Renewed for three years . It is number in dispute that the order meant that the appellants permit was renewed for three years. No express order was made on the respondents application for the grant of the permit to him. The respondent preferred an appeal against this order to the Vindhya Pradesh Transport Appellate Tribunal, the appellate authority under the Act. It was companytended by the appellant before the Appellate Tribunal that the appeal was number companypetent. The Appellate Tribunal rejected this companytention and passed an order cancelling the Permit granted to the appellant by the State Transport Authority and issuing the permit to the respondent. The appellant then moved the Judicial Commissioner, Vindhya Pradesh, for a writ of certiorari quashing the order of the Appellate Tribunal on the ground that it disclosed an error on the face of it because under the Act numberappeal lay from the order that was passed by the subordinate authority. The learned Judicial Commissioner held that the appeal was companypetent and dismissed the application for the writ. Hence the present appeal. The question is, Did an appeal lie to the Appellate Tribunal from the order made by the State Transport Authority in the present case ? Section 64 of the Act companytains the provisions for appeals. Whether the appeal lay or number will have to be decided by reference to these provisions. The portion of the section which will have to be companysidered is in these terms Section 64. Any person- a aggrieved by the refusal of the State or a Regional Transport Authority to grant a permit,or e aggrieved by the refusal of renewal of a permit,or f being a local authority or police authority or an association which, or a person providing transport facilities who, having opposed the grant of a permit is aggrieved by the grant thereof mayappeal to the prescribed authority The prescribed authority was as we have earlier stated, the Appellate Tribunal. Clearly the respondent was number a person companytemplated by cl. e of the section. It is also number in dispute that he was number one of those mentioned in cl. f . The respondent does number claim that any of these clauses gave him the right of appeal. He however claims a right of appeal under cl. a . In our view that claim is justified. He had applied for a permit and had number got it. He was therefore a person aggrieved by the refusal to grant a permit and clearly came within cl. a . It is true that the order of the State Transport Authority did number expressly refuse him the permit. But that numberdoubt was the effect of the order that was made. He had made an application for the grant of the permit to him and the application was disposed of without granting him the permit but granting it to a companypeting applicant. There was only one permit which companyld be granted and the result of the order was to give it to the appellant. The permit was thereby necessarily refused to the respondent. The fact that an express order was number made cannot operate to his prejudice. In S. Gopala Reddi v. Regional Transport Authority, North Arcot 1 , in circumstances identical to those in the present case an order was made by the Transport Authority in the same terms as we have here and it was said, The grant of a permit to one, would automatically mean the refusal of the permit to the other . We are in entire agreement with the view expressed there. Therefore it seems to us that the respondent was a person who had been aggrieved by the refusal to grant him a permit and the appeal by him was fully companypetent. But it was said on behalf of the appellant that in the present case it would be wrong to imply an order refusing the permit to the respondent for numbere such companyld be made under the Act and therefore here there was numberscope for applying s. 64 a . The companytention was put in this way When there are a number of applications in respect of the same permit, one of which is by way of renewal to which objections have been filed and the others, fresh applications, the latter companyld number be taken up for companysideration till the former and the objections made to it had been companysidered. If the objections to the renewal failed, the application for renewal had to be granted and the fresh applications for permit companyld number then be companysidered at all. If on the other hand, the objections to the renewal succeeded, the renewal companyld number be granted and the choice had then to be made from the new applicants for the permit. In the present case the objection to the renewal of the applicants permit raised by the respondent failed and the appellants permit was in companysequence renewed. Therefore the respondents application for a permit, which was an application for a new permit, never fell to be companysidered and that is why numberorder on it was made at all. We think this companytention companypletely lacks substance. It was said that was the result of ss. 47, 1 1955 2 M.L.J. 13o. 57 and 58 of the Act but we find numberhing in any of them to support it. Section 47 does number deal with the order in which applications for the renewal or grant on a new permit are to be heard and does number help at all Section 57 3 provides that after an application for a permit had been made others can make representations against it. These are the objections to an application for the grant or renewal of a permit earlier referred to. Sub-section 5 of s. 57 provides that the application for a permit which includes an application for the renewal of a permit and the representations against it shall be disposed of at a public hearing at which the person making the application and the persons making the representations shall be given an opportunity of being heard. But this does number show that all other applications for the same permit and all other repre- sentations in companynection therewith, cannot be disposed of at the same hearing. Indeed, s. 58 2 puts it beyond doubt that an application for renewal of a permit and the fresh applications for the same permit have to be heard together. That section so far as is relevant is in these terms Section 58 A permit may be renewed on an application made and disposed of as if it were an application for a permit a b Provided further that, other companyditions being equal, an application for renewal shall be given preference over new applications for permits . The section therefore requires an application for the renewal of a permit to be dealt with in the same way as a new application for a permit. Such an application has therefore to be heard along with new applications for the permit. Again, numberquestion of giving an application for renewal preference over new applications for permits which the section requires to be given, can arise unless they are companysidered together. We are therefore unable to hold that in the present case the 88 State Transport Authority had numberjurisdiction to companysider the respondents application or to make any order in respect of it as it granted the appellants application for renewal. It follows that the order that was made amounted in fact to a refusal to grant the permit to the respondent. It was then said that a renewed permit was a companytinuation of the old permit and hence once the old permit was renewed, numberquestion of companysidering the applications for new permit arose. We find numberhing to support this view. It is true that in V. C. K. Bus Service Ltd. v. Regional Transport Authority, Coimbatore 1 , this Court held that a renewed permit was a companytinuation of the old permit but it did number hold that the appropriate authority companyld number companysider the applications for a fresh permit along with the application for renewal of the permit. This case does number assist the appellant at all. It was then companytended that s. 64 did number provide for an appeal by a person aggrieved by the renewal of a permit unless he was one of those mentioned in s. 64 f , which the respondent was number, and therefore even if an appeal by the respondent was companypetent under s. 64 a , in such an appeal the Appellate Tribunal companyld number set aside the order of renewal made by the State Transport Authority. It was said that if in such an appeal the order granting a renewal companyld be set aside, in effect an appeal against an order renewing a permit would become companypetent though the law did number per- mit this. We were referred to Dholpur Co-operative Transport Etc. Union Ltd. v. The Appellate Authority, Rajasthan 2 , in support of this companytention. It was there said Where an appeal has been made under el. a against the refusal of a permit, the Appellate Authority will generally have the right to give relief to the appellant by the grant of a permit, but will number have any jurisdiction to cancel the permit granted to another person, unless a foundation has been laid before the Regional Transport Authority for an appeal provided 1 1957 S.C.R. 663. A.I.R. 1955 Rajasthan 19, 26. by el. f by an objection of somebody entitled to appeal under that clause. If such an objection has been made then it does number matter whether that particular person appeals or number. In such a case, on an appeal under s. 64 a , the Appellate Authority may companysider the objection of the nature specified in cl. f before the Regional Transport Authority and give its own decision in the matter. It was said that the respondent though he had filed objections was number a person who can claim a right of appeal under el. f of s. 64. It was therefore companytended on the authority of the observations referred to above that numberfoundation had been laid for an appeal provided by cl. f and so the Appellate Tribunal companyld number cancel the permit granted to the appellant by the subordinate authority. We are unable to agree that in an appeal which is companypetent under cl. a of the section, the order renewing or granting a permit cannot be set aside unless the case was such that an appeal under el. f would have also been companypetent. So to hold would result in making the right of appeal given by cl. a wholly infructuous in those cases where numberrelief can be given in the appeal except by setting aside the order granting or renewing a permit, for example, where there was only one permit to grant as in the present case. Such an interpretation has to be rejected. It is based on cl. f . But this clause cannot be companystrued in a manner so as to render infructuous another clause in the same section. Nor do we find anything in el. f to justify such a companystruc- tion. The different clauses in the section deal with different situations. Each is independent of the others. Clause f deals with a case where an objection had been filed against the fresh grant or the renewal of a permit but the permit has numbere the less been granted or renewed. The clause gives the objector a right of appeal against the result of the rejection of his objection if he is one of the persons mentioned in it. The clause gives him that right irrespective of the fact whether he has a right of appeal under any of the other clauses or number. It does number say that a permit granted or renewed cannot be questioned except at the instance of the persons mentioned in cl. f it does number affect the right of appeal under the other clauses. If an appeal lies under any of the other clauses, that of companyrse must be an effective appeal and the appellate authority must therefore have all powers to give the relief to which the appellant is found entitled. Again s. 64 is number companycerned with defining the powers of the appellate authority and does number purport to do so. Nor is there anything in the Act to lead to the companyclusion that an applicant for a permit is bound to put in objections against the applications of companypeting applicants for the grant or the renewal of the permit. The relief that can be granted in an appeal by any person which is companypetent would number depend on whether he bad put in objections against the applications of the companypeting applicants or number. We do number therefore think that cl. f of s. 64 in any way restricts the power of the Appellate Tribunal to grant all proper reliefs in an appeal companypetent under el. a of the section. If cl. f does number so restrict the power of the Appellate Tribunal, numberhing else has been pointed out to us as having that effect. In our view, there is numberhing in the Act to prevent the Appellate Tribunal from setting aside the order of the State Transport Authority renewinu the appellants permit. We think the matter was companyrectly put in S. Gopala Reddis case 1 when it was said at p. 132 The appeal was, in our opinion, perfectly companypetent as an appeal against the order of the Regional Transport Authority, refusing to grant a permit. The fact that such an appeal involved an attack on the order granting a renewal of a permit to the 4th respondent would number prevent the appeal being what it was, viz., an appeal against a refusal to grant a permit, to the appellant. The Central Road Traffic Board erred in presuming that it was number open to them in the appeal to companysider the merits of the order granting renewal of the 4th respondents permit. Indeed, the first question which had to be determined in the appeal filed by the appellant would be the propriety of the action of the Regional Transport Authority in granting 1 1955 2 M.L.J. 130. renewal to the 4th respondent. The filing of the appeal by the appellant set at large the order of the Regional Transport Authority granting the renewal. In the Dholpur Co-operative Transport etc. Union Ltd. case on which the appellant relies, numberobjection had been filed against any of the companypeting applications for the grant of a permit and it was held that the appellate authority had numberpower in such circumstances on appeal by a person whose application for the grant of the permit had been refused, to give relief by cancelling a permit granted by the subordinate authority to one of the applicants. It was there thought that Nadar Transport, Tiruchirapalli v. State of Madras 2 led to this companyclusion. For the reasons earlier mentioned we are unable to agree with this part of the decision in the Dholpur Co-operative Transport etc. Union Ltd. case 1 . With the rest of the decision there we are number companycerned and as to that we do number say anything. We also find numberhing in the Nadar Transport case 2 , to support the companyclusion arrived at in Dholpur Co-operative Transport etc. Union Ltd. case 1 . In the Nadar Transport case 2 , on the companytrary, it was observed that see. 64, sub-sees. a and f are intended in our opinion to apply to different situations and that the power of the appellate authority is number restricted in any manner either by the provisions of s. 64 or by any of the rules made under the powers companyferred by the Act .

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 395 of 1957. Appeal by special leave from the judgment and order dated December 21, 1955, of the Calcutta High Court in Income-tax Reference No. 15 of 1954. C. Sampath Iyengar, Dipak Dutta Choudhury and B. N. Ghosh, for the appellant. C. Setalvad, Attorney-General for India, R. Ganapathy Iyer, B. H. Dhebar and D. Gupta, for the respondent. 1959. May 5. The Judgment of the Court was delivered by HIDAYATULLAH, J.-The Indian Molasses Co. Private Ltd., Calcutta hereinafter called the assesses Company , have brought this appeal, with the special leave of this Court granted on November 9, 1956, against the judgment of the High Court of Calcutta dated December 21, 1955, in Income- tax Reference, No. 15 of 1954. The question of law referred to the High Court was Whether on the facts and in the circumstances of the case, and on a true companystruction of the Trust Deed, dated 16th September, 1948, and the Policy dated the 13th January, 1949, the payments made by the assessee Company and referred to in paragraph 4 above companystitute expenditure within the meaning of that word in section 10 2 xv of the Indian Income-tax Act, 1922, in respect of which a claim for deduc- tion can be made,subject to the other companyditions mentioned in that clause being satisfied . The question was answered in the negative. The facts of the case are as follows One John Bruce Richard Harvey was the Managing Director of the assessee Company in 1948. He had by then served the Company for 13 years, and was due to retire at the age of 55 years on September 20, 1955. There was, it appears, an agreement by which the Company was under an obligation to provide a pension to Harvey after his retirement. On September 16, 1948, the Company executed a Trust Deed in favour of three trustees to whom the Company paid a sum of pound 8,208-19-0 Rs. 1,09,643 and further undertook to pay annually Rs. 4,364 pound 326-14 sh. for six companysecutive years, and the trustees agreed to execute a declaration of trust. The trustees undertook to hold the said sums upon trust to spend the same in taking out a deferred -Annuity Policy with the Norwich Union Life Insurance Society in the name of the trustees but on the life of Harvey under which pound 720 per annum were payable to Harvey for life from the date of his superannuation. It was also provided in the deed that numberwithstanding the main clause the trustees would, if so desired by the assessee Company, take out instead a deferred longest life policy, with the said Insurance Company, in their names, but in favour of Harvey and Mrs. Harvey for an annuity of pound 558-1-0 per annum payable during their joint lives from the date of Harveys superannuation and during the lifetime of the survivor, provided further that if Harvey died before he attained the age of 55 years the annuity payable to Mrs. Harvey would be pound, 611-12-0 during her life. It was further provided that should Harvey die before attaining the age of 55 years, the trustees would stand possessed of the capital value of the Deferred Annuity Policy,. upon trust to purchase therewith an annuity for Mrs. Harvey with the above 2 Insurance Company or another Insurance Company of repute. The other companyditions of the deed of trust need Dot be companysidered, because they do number bear upon the companytroversy. In furtherance of these presents, the trustees took out a policy on January 12, 1949. In addition to companyditions usual in such policies, it provided for the following benefits Amount per annum of deferred Annuity pound 563-5-8 p. a. if both Mr. and Mrs. Harvey be living on September 20,1955. pound, 720-0-0 p. a. if Mrs.Harvey should die before September 20, 1955, leaving Harvey surviving her. pound, 645-0-0 p. a. if Harvey should die before September 20, 1955, leaving Mrs. Harvey surviving him. There was a specialprovision which must be reproduced Provided the companytract is in force and unreduced, the Grantees i. e., the trustees shall be entitled to surrender the Annuity on the Option Anniversary i.e., Sept. 20, 1955 for the Capital sum of pound 10,169 subject to written numberice of the intention to surrender being received by the Directors of the Society within the thirty days preceding the Option Anniversary. Two other clauses of the second schedule of the Policy may also be quoted III If both the Nominees shall die whilst the Contract remains in force and unredressed and before the Option Anniversary the said funds and Property of the Society shall be liable to make repayment to the Grantees of a sum equal to a return of all the premiums which shall have been paid under this Contract without interest after proof thereof and subject as hereinbefore provided. IV The Grantees shall before the Option Anniversary and after it has acquired a Surrender Value be entitled to surrender the Contract for a Cash Payment equal to a return of all the premiums at the yearly rate which have been paid less the first years premium or five per cent. of the Capital Sum specified in the Special Provision of the First Schedule whichever shall be the lesser sum, provided that if the Deferred Annuity has been reduced an equivalent reduction in the guaranteed Surrender Value as calculated above will be made. The assessee Company paid the initial sum and the yearly premia for some years before Harvey died. In the assessment years 1949-50, 1950-51, 1651-52 and 1952-53, it claimed a deduction of these sums from its profits or gains under s. 10 2 xv of the Indian Income-tax Act hereinafter called the Act , which provides Such profits or gains shall be companyputed after making the following allowances, namely, any expenditure number being in the nature of capital expenditure or personal expenses of the assessee paid out or expended wholly and exclusively for the purposes of such business, profession or vocation. This claim was disallowed by the Department and the Appellate Tribunal. The Tribunal held that it was number necessary to decide if the expenditure was wholly or exclusively for the purposes of the Companys business, and if so, whether it was of a capital nature, because in the Tribunals opinion there was numberexpenditure at all. The reason why the Tribunal held this way may be stated in its own words Clauses 1 and II do number companytain any provision having a material bearing upon Clause 111 . Therefore if it happens that both Mr. and Mrs. Harvey die before 20th September, 1955, all the payments till made through the Trustees to the Insurance Society will companye back to the Trustees and as there is number the slightest trace of any indication anywhere that the Trustees should have any beneficient interest in these moneys, there would be a resultant trust in favour of the Company in respect of the moneys thus far paid out. In other words, what has been done amounts to a provision for a companytingency which may never arise. Such a provision can hardly be treated as payment to an employee whether of remuneration or pension or gratuity, and cannot be a proper deduction against the incoming of the business of the Company for the purpose of companyputing its taxable profits. In short, there has been numberexpenditure by the Company yet there has been only an allocation of a part of its funds for an expenditure which may or may number have to be incurred in future. The Tribunal, however, referred the above-stated question for the opinion of the High Court. The High Court numbericed the limited scope of the question, and pointed out that the Tribunal had stated at the end of the Statement of the Case In the event of the High Court holding that there was an expenditure in this case, it would still be necessary for the Tribunal whether the money was laid out or expended wholly and exclusively for the purposes of the assesses business and, if so, whether the expenditure was in the nature of capital or revenue expenditure. The learned Chief Justice of the Calcutta High Court Sarkar, J., companycurring felt the difficulty of the ques- tion. He analysed the ingredients of cl. xv , and pointed out that the question referred to but one such ingredient. The Divisional Bench, however, did number call for an additional statement of fact, or ask that the rest of the matter be referred, so that the whole of the question involved might get disposed of It observed This Court has always companystrued questions referred to it with a certain degree of strictness and has number allowed any point to be canvassed before it which had number been raised before the Appellate Tribanal and which was number companyered by the Tribunals appellate order. I am, therefore, of opinion that the question should be taken as companyering only the ground upon which the Tribunal held the payments to be number allowable as deductions as number embracing any other ground. We must express our regret that the case took the companyrse it did. The order of assessment was passed as far back as 1952, and seven years have number passed during which only one question out of three is before the Courts for decision. Section 10 2 xv was analysed by the learned Chief Justice in these words It will be numbericed that three ingredients of the clause lie on the surface of its language. In order that a deduction may be claimed under its provisions it must be proved first that there was an expenditure, secondly, that the expenditure was number in the nature of a capital expenditure- I am leaving aside the personal expenses-and, thirdly, that it was laid out or expended wholly and exclusively for the purposes of the assessees business-I am leaving out profession or vocation. We must number be understood as finding fault with the Divisional Bench. It decided the question as framed. It is the Tribunal which referred the question in this form, keeping to itself the right to decide about the other ingredients of the clause later. Whether the question can be answered in the bland form it is posed, is a matter to which we will have to address ourselves presently. But it appears to us that this is a very unsatisfactory way to go about the business. Perhaps, the Tribunal decided this case in this way and referred the question it did, because it felt that if this Court in Allahabad Bank Ltd. v. Com- missioner of Income-tax, West Bengal 1 was able to decide whether a particular outlay was expenditure without reference to the other ingredients of cl. xv , the same companyld be done in this case also. That case, however, was very different in its facts. There, certain companytributions on trust for payment of pensions to employees were held number to be I expenditure, because on the original trust failing, the money was 1 1954 S.C.R. 195. deemed to be held by the trustees on a resulting trust for the benefit of the maker. If the same can be said in this case, namely, that the money companytinued to belong to the assessee Company in the account years, its payment to the trustees or the Insurance Company numberwithstanding, there may be a possibility of answering the question as was done in the decision of this Court cited earlier. But if such a clear-cut proposition cannot be laid down, then, obviously, there is companysiderable difficulty in deciding what is I expenditure within the clause, without reference to the rest of its provisions. Of companyrse, to find the meaning of the word I expenditure , a dictionary is ill that is needed, but to go further and to decide whether the outlay in this case was I expenditure , the companytext in which the word is used in the clause cannot successfully be left out. Mr. Sampath Iyengar for the assessee Company companyplained before us of the narrowness of the question, though before the High Court be was opposed to any extension of the ambit of the question. The following passage from the judgment of the Chief Justice shows the respective attitudes of the Department and the assessee Company before the Bench Mr. Meyer companytended that language entitled him to argue number only that there had been numberexpenditure in fact at all, but also that even assuming that there bad been an expenditure in the sense of a physical spending, still the expenditure was number such as companyld be claimed as an allowance under the clause against the profits of the relevant accounting year in view of the fact that it was, in any event, an expenditure made to meet a companytingent liability. Mr. S. Iyengar, who appeared on behalf of the assessee, objected to the scope of the question being so enlarged and he referred to the appellate order of the Tribunal which had proceeded on a single ground. The learned Attorney-General who appeared for the Department at once companyceded the difficulty of answering the question, but companytended that the question in its present form companyld be answered, though he agreed that if it companyld number, the Court would be free to say so. We cannot help saying that though the Tribunal may be at liberty to decide a case as appears best to it, there is companysiderable hardship to the tax-payers, if questions of law are decided piecemeal and repeated references to the High Court are necessary. The jurisdiction of-the High Court is advisory and companysultative, and questions of interpretation of the law in this attenuated form can well be avoided. This will tend to cut down the duration of litigation. In deciding that the payment of the lump sum and premia was number expenditure, different views were expressed as the case progressed. The Income-tax Officer held that in the absence of a written agreement companyering the companyditions of service, remuneration, etc., the arrangement companyld only be taken as a provision for a gratuity, more so as there was a provision in the deed of trust for payment of an annuity to Mrs. Harvey in the event of Harveys demise. According to him, there were so many alternative arrangements for the disbursement of the money laid out, that it was impossible to say what shape the annuity would ultimately take and till certain events happened, the I expenditure was number effective. Following, therefore, the case in Atherton v. British Insulated and Helsby Cables, Ltd. 1 and distinguishing Hancock v. General Reversionary and Investment Co. Ltd. 2 , the claim for deduction was rejected by the Income-tax Officer. The Appellate Assistant Commissioner companysidered that in the absence of an agreement the payment must be regarded as an ex gratia payment of a capital nature, so Iona as the trust intervened. The Appellate Assistant Commissioner also companymented upon the existence of a provision for Mrs. Harveys pension which companyld number be a part of the agreement. He was thus of the opinion that the case fell within the rule laid down in Atherton,s case 1 . This opinion of the Tribunal which has already been reproduced earlier, was shortly that there was numberexpenditure yet and this was only an allocation of funds for an I expenditure which might or might number be incurred in the future. The High Court analysed the terms of the deed of 1 1925 10 Tax Cas. 155. 2 1918 7 Tax Cas. 358. trust, and pointed out that there were two companytingencies in which money was likely to revert to the assessee Company. The first companytingency was if both Harvey and Mrs. Harvey died before September 20, 1955. The second companytingency was due to an omission in el. III to provide for a pension to Harvey, if Mrs. Harvey died before the above date. In that event, the trust would have failed, unless a policy was taken out under 61. II . The High Court held that if any of these two circumstances happened, then there would have been a resulting trust in favour of the assessee Company, and it would have been entitled to get back all the money laid out by it. We must say here that the High Court was in error as to the second of the two companytingencies because the policy which was taken out provided for all the three alternatives, and pension was payable to both or either survivor, though in different sums. Even in the trust deed, the three alternative pensions were provided as follows pound 720, if the annuity was payable to Harvey alone or pound 558-1-0, during the joint lives of both or survivor or pound 611-12-0, to Mrs. Harvey if Harvey died before September 20, 1955. The special provision in the policy, however, companyered the first companytingency of both the prospective annuitants dying before September 20, 1955, and if that happened, the assessee Company would have, if it chose to surrender the policy, got back the sum of pound 10,169 subject to a written numberice of the intention to surrender being received by the Insurance Company within thirty days preceding September 20, 1955. The High Court then observed in addition that there was numberinstant necessity for the expenditure, number was the money laid out for a business purpose of an instant character, number did it bring in a present asset which would always remain an asset in that form, the money having gone for ever. The High Court pointed out that there was always a possibility ,of a resulting trust in favour of the Company and the money companyld number, therefore, be held to have been ex- pended. The companyclusion of the High Court, therefore, was that the assessee Company must be held to have set apart I tentatively a sum of money in order that it might be available for the payment of a I gratuity to Harvey and Mrs. Harvey, but there being I numberprovision for the application of the money in the event of those companytingencies number occurring and numberannuity being payable to any one, there was numberI expenditure in any real and practical sense of the term. The arguments in this appeal have ranged, as they did before the High Court, over a very wide field. No useful purpose will be served in following them through all their companyvolutions. The main points urged on behalf of the assessee Company are that payment of pension is an expenditure of a revenue character and so also the payment of a lump sum to get rid of a recurring liability to pay such pension. This is illustrated from some English cases, and reference is made also to Ch. IX-B of the Act. It is also submitted that in so far as payment by the assessee Company was companycerned, it was, in point of fact, made, and this was I expenditure within the dictionary meaning of the word. The argument of the Department is that by I expenditures meant a laying out of money for an accrued liability and number for a companytingent liability, which companytingency may or may number take place that the present arrangement was only a setting apart of money for a Contingent liability and till the liability became real, there was numberexpenditure. The assessee Company, however, companytends that expenditure on insurance is number companytingent, because though the companytingency relates to life and depends on it, the probabilities are great being estimated on actuarial calculations and the expenditure is real. Both sides rely on a large number of English decisions. We shall number companysider the arguments in detail and refer to those authorities, which are relevant. In dealing with cases expounding the English In. companye-tax law, it must always be borne in mind that the scheme of legislation there is number the same as in our companyntry. No doubt, a certain amount of assistance can, with caution, be taken from them, but the problems under our Income-tax laws must be resolved, in the ultimate analysis, with reference to our laws. It has been ruled under the English statute that sums paid to an employee as pension or gratuity are deductible as money laid out and expended for the purpose of trade, profession or vocation. See Smith v. Incorporated Council of Law Reporting for England and Wales 1 . It has also been ruled that a single payment to avoid the recurring liability of an employees pension is also a proper deduction. The leading case on the subject is Hancock v. General Reversionary and Investment Co. Ltd. 1 . In that case, the taxpayer was under a liability to pay a pension to a retired actuary, and pension had, in fact, been paid for some years. Subsequently, the tax-payer purchased an annuity for the employee, which he accepted in place of his pension. The sum paid in purchasing the annuity was allowed as a deduction in companyputing the tax-payers profits, it being held that it was money wholly and exclusively laid out or expended for the purposes of the trade, profession or vocation. On the other hand, a sum which a companypany put into a fund for the relief of invalidity, etc., was held number to be an admissible deduction, and the case last cited was distinguished. See Rowntree, Co. Ltd. v. Curtis 3 . Pollock, M. R., drew pointed attention to the words of Lush, J., in the earlier case, where lie observed at p. 698- It seems tome as impossible to hold that the fact that a lump sum was paid instead of a recurring series of annual payments alters the character of the expenditure, as it would be to hold that, if an employer made a voluntary arrangement with his servant to pay the servant a years salary in advance instead of paying each years salary as it fell due, he would be making a capital outlay., and added that Lush, J., had described the actuarial payment made in Hancocks case 2 as a pension in another form, which companyld number be said of the invalidity, claims for which were wholly uncertain. Warrington, L. J., pointed out that the test to apply was first 1 1914 3 K. B. 574 6 Tax Cas. 477. 2 1918 7 Tax Cas. 358. 3 1925 1 K. B. 328 8 Tax Cas. 678. whether there was an expenditure which he held there was, and next whether it companyld be said to be wholly and exclusively for the purposes of the trade which, in his opinion, companyld number be said of the expenditure in that case. The words of the learned Lord Justice on the first proposition have a bearing upon the present case, and may be reproduced here at p. 703 I am inclined to agree with Mr. Latter in his companytention that the money has actually been expended. There is numberhing like a resulting trust in favour of the companypany although there is that provision which I have already called attention to in the trust deed, that one of the things which might be done would be to abrogate altogether the trust or the provisions of the deed and to substitute other rules and provisions. But it seems to me that cannot be said to be a resulting trust in favour of the companypany having regard to the other objects which are pointed out as those to which the scheme was directed. Similarly, a sum of money paid to the trustees to form a nucleus of a pension fund for the benefit of some of its employees by a companypany was also number held to be an admissible deduction in Athertons case 1 . Viscount Cave, L. C., recalled the test laid down in a rough way by Lord Dunedin in Vallambrosa Rubber Co. v. Farmer 2 at p. 192 that, capital expenditure is a thing that is going to be spent once and for all and income expenditure is a thing which is going to recur every year but added that it was number and was number meant to be a decisive test. The Lord Chancellor observed, however, that, 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. 1 1925 10 Tax Cas. 155. 2 1910 5 Tax Cas. 529. Again, in Morgan Crucible Co. Ltd. v. The Commissioners of Inland Revenue 1 , the payment to an insurance companypany to take out a policy was held number to be an admissible deduction. There, the companypany operated a scheme for payment of pensions to retired or incapacitated employees, reserving to itself the uncontrolled discretion to vary or cease payment of pensions. When pensions were paid, they were deducted -but when the companypany took out a policy, without, informing their employees, for payment to itself of annuities equal to the pensions, it was held that by this the companypany had acquired an asset and this was in the nature of a capital asset. Rowlatt, J., in distinguishing Hancocks case 2 , observed that unlike that case the liability to pay pensions was number got rid of and that the companypany had acquired an asset. The learned Judge companytinued at p. 317 It is true they have got an asset which would give them, in all probability, numberhing on balance, because they use it to pay these pensions but they have got an asset they had number any pension fund to pay these pensions with, and number they have got an insurance companypany which will in the future number extinguish the liability but companyntervail it and they have got the companymand of this policy to the extent that they are entitled to get their capital money say capital money without prejudice-back from the insurance companypany on surrendering the policies. From these cases, there are deducible certain principles of a fundamental character. The first is that capital expenditure cannot be attributed to revenue and vice versa. Secondly, it is equally clear that a payment in a lump sum does number necessarily make the payment a capital one. It may still possess- revenue character in the same way as a series of payments. Thirdly, if there is a lump sum payment but there is numberpossibility of a recurrence, it is probably of a capital nature, though this is by numbermeans a decisive test. Fourthly, if the payment of a lump sum closes the 1 1932 2 K. B. 185 17 Tax Cas. 311, 317. 2 1918 7 Tax Cas. 358. liability to make repeated and periodic payments in the future, it may generally be regarded as a payment of a revenue character Anglo-Persian Oil Co. Ltd. v. Dale 1 , and lastly, if the ownership of the money whether in point of fact or by a resulting trust be still in the tax-payer, then there is acquisition of a capital asset and number an expenditure of a revenue character. Side by side with these principles, there are others which are also fundamental. The Income-tax law does number allow as expenses all the deductions a prudent trader would make in companyputing his profits. The money may be expended on grounds of companymercial expediency but number of necessity. The test of necessity is whether the intention was to earn trading receipts or to avoid future recurring payments of a revenue character. Expenditure in this sense is equal to disbursement which, to use a homely phrase, means something which companyes out of the traders pocket. Thus, in finding out what profits there be, the numbermal accountancy Practice may be to allow as expense any sum in respect of liabilities which have accrued over the accounting period and to deduct such sums from profits. But the Income-tax laws do number take every such allowance as legitimate for purposes of tax. A distinction is made between an actual liability in praesenti and a liability de futuro which, for the time being, is only companytingent. The former is deductible but number the latter. The case which illustrates this distinction is Peter Merchant Ltd. v. Stedeford 2 . No doubt, that case was decided under the system of Income-tax laws prevalent in England, but the, distinction is real. What a prudent trader sets apart to meet a liability, number actually present but only companytingent, cannot bear the character of expense till the liability becomes real. We may here refer to two other cases. In Alexander Howard Co. Ltd v. Bentley 3 , a business of blouse and gown manufacture was carried on by one A. C. Howard. His three brothers were employed by him as salaried managers. In 1933 C. Howard remarried 1 1932 1 K. B. 124 16 Tax Cas. 253. 2 1948 30 Tax Cas. 496. 3 1948 30 Tax Cas. 334. and under pressure from his brothers a companypany was formed and the directors were authorised to enter into an agreement to purchase the business. A. C. Howard was the governing director of the companypany and his three brothers, permanent directors. The companypany also entered into a service agreement with them, and Art. 107 thereof provided After the death of the said Alexander Charles Howard and during such. time as his legal personal representatives shall hold at least Ten Thousand Shares in the Company, any widow surviving him shall receive out of the profits of the Company an annuity of One Thousand Pounds per annum during her life. This service agreement was executed on January 3, 1934. In 1943 by a deed of release A. C. Howard released to the companypany all right to a claim in respect of the annuity in companysideration of the payment to him of a sum of pound 4,500. This amount was based upon the findings of an actuary. The taxpayer submitted that the sum paid in redemption of the annuity was a proper charge against revenue, and was deductible. The Commissioners held against the companypany on two main grounds. They held that in order to decide whether the sum paid to obtain release of the annuity was properly allowable as a deduction, they had to decide first whether the annuity itself would have been properly chargeable to revenue, Anglo-Persian Oil Co. Ltd. v. Dale 1 and Bean Doncaster Amalgamated Collieries Ltd. 2 per Lord Simon at pp. 311-312 and they held next that the redemption of the annuity freed the companypany from a companytingent liability and the companypany had. thus secured only an enduring advantage. Singleton, J., before whom the case came in appeal, affirmed the decision. He pointed out that this was number a case of a companypany providing an annuity or pension for an employee, for to quote him the wife of Mr. Alexander Charles Howard had numberhing whatever to do with the Company . If, therefore, 1 1932 1 K. B. 124 16 Tax Cas. 253. 2 1946 27 Tax CaS. 296. the original annuity was number chargeable to revenue, the sum of pound 4,500 paid to avoid it, companyld number also be. The other case is Southern Railway of Peru Ltd. v. Owen 1 . In that case, the English companypany was bound to provide companypensation to all its employees on the termination of their services. Legislation to this effect was deemed to be a part of the companytract of service. Such right arose on dismissal or on termination of the employment by the employer after proper numberice. The companypensation was an amount equal to one months salary for every year of service. There were, however, certain exceptions under which the companypensation was number payable. The companypany sought to deduct an amount equal to the burden cast on it each year but the claim was refused. It was held by majority that though the companypany was entitled to charge against one years receipts the companyt of making provision for the retirement payments which would ultimately be payable as it had the benefit of the employees services during that year, provided the present value of the future payments companyld be fairly estimated , since the factor of discount was ignored in making the deduction, the claim companyld number be entertained. These two cases illustrate the propositions that the recurring liability of a pension which is companypressed into a lump payment should itself be a legal obligation, and that, if companytingent, the present value of the future payments should be fairly estimable. If the pension itself be number payable as an obligation, and if there be a possibility that numbersuch payment may be necessary in the future, the whole of the amount cannot be deducted but only the present value of the future liability, if it can be estimated. It is significant that the case in Sun Insurance Office v. Clark 2 was applied to the last companyollary. So far, we have dealt with the principles which underlie leading cases decided in England, some of which were in the forefront of the arguments. We have already stated that the English decisions should be read with companysiderable caution. Under the English Income-tax Act, the law is stated in a negative I 1957 A.C. 334. 2 1912 A.C. 443. form. Section 137 of 15 16, Geo. 6 I Eliz. 2, c. 10, which prescribes the general rules regarding deductions is expressed in the negative, and r. a which was applicable to the cited cases reads as follows Subject to the provisions of this Act, in companyputing the profits or gains to be charged under Case I The Case 11 of schedule D, numbersum shall be deducted in respect of- a any disbursements or expenses, number being money wholly and exclusively laid out or expended for the purposes of the trade, profession or vocation. In these several cases, emphasis was sometimes laid on the words wholly and exclusively , sometimes on laid out or expended and sometimes on for the purposes of the trade It was the nature of the liability or the time of payment or the value of the payment or all of them which determined whether the amount should be deducted or number. Clause xv of s. 10 2 of the Act, with which we are companycerned, reads as follows Business- 1 The tax shall be payable by an assessee under the head I Profits and gains of business, profession or vocation in respect of the profits or gains of any business, profession or vocation carried on by him. Such profits or gains shall be companyputed after making the following allowances, namely- any expenditure number being an allowance of the nature described in any of the 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. This section, though it enacts affirmatively what is stated in the negative form in the English statute, is substantially in pari materia with the English enactment and would have justified our companysidering the English authorities as aids to the interpretation thereof But there is numbercase directly on what is I expenditure and if the authorities under the English statute were to be of real assistance, the whole of the matter should have been before us. The question, however, limits the approach to whether the payments made towards the policy were expenditure within cl. xv . I Expenditure is equal to I expense and expense is money laid out by calculation and intention though in many uses of the word this element may number be present, as when we speak of a joke at anothers expense. But the idea of I spending in the sense of I paying out or away money is the primary meaning and it is with that meaning that we are companycerned. I Expenditure is thus what is paid out or away and is some- thing which is gone irretrievably. To be an allowance within cl. xv , the money paid out or away must be a paid out wholly and exclusively for the purpose of the business and further b must number be i capital expenditure, ii -personal expense or iii an allowance of the character described in cls. i to xiv . But whatever the character of the expenditure, it must be a paying out or away, - and we are number companycerned with the other qualifying aspects of such expenditure stated in the clause either affirmatively or negatively. So, the question is whether in a business sense the amount was spent, that. is to say, paid out or away. To discuss this, we must go to the terms of the policy. No doubt, under the general terms of the policy an annuity was to be provided for the Harveys. We are number companycerned with Mrs. Harvey, because she had numberclaim to the annuity or pension any more than Mrs. Howard bad in Alexander Howard Co. Ltd. v. Bentley 1 already discussed by us elsewhere. That companysideration involves a finding on whether an annuity to Mrs. Harvey was an expense made wholly and exclusively for the purpose of the business, and that is number a matter open to us by the limited question posed. In any event, the -provision for a pension or annuity to Mrs. Harvey cannot rank higher than an annuity to Harvey, and the matter can be companysidered on the limited aspect that a pension or annuity to Harvey was also companytemplated. 1 1948 3o Tax Cas, 334. In the years of account the assessee Company did hand out to the trustees, the sums of money for which deduction is claimed. But was the money spent in so far as the assessee Company was companycerned ? Harvey was then alive and it was number known if any pension to him would be payable at all.Harvey might number have the lived to be 55 years. He might even have abandoned c his service or might have been dismissed. Till September 20, 1955, the assessee Company had dominion through the grantees over the premia paid, at least in two circumstances. They are to be found in the special provision, and the third clause of the second schedule of the policy. These provisions have been quoted already, but may again be reproduced Special provision Provided the companytract is in force and unseduced, the Grantees shall be entitled to surrender the Annuity on the Option Anniversary for the Capital sum of pound 10,169 subject to written numberice of the intention to surrender being received by the Directors of the Society within the thirty days preceding the Option Anniversary. - Cl. III If both the Nominees shall die whilst the Contract remains in force and unreduced and before the Option Anniversary the said funds and Property of the Society shall be liable to make repayment to the Grantees of a sum equal to a return of all the premiums which shall have been paid under this Contract without interest after proof thereof and subject as hereinbefore provided. To be a payment which is made irrevocably there should be numberpossibility of the money forming, once again, a part of the funds of the assessee Company. If this companydition be number fulfilled and there is a possibility of there being a resulting trust in favour of the Company, then the money has number been spent, i. e., paid out or away, but the amount must be treated as set apart to meet a companytingency. There is a distinction between a companytingent liability and a payment depending upon a companytingency. The question is whether in the years of account, one can describe the assessee Companys liability as companytingent or merely depending upon a companytingency. In our opinion, the liability was companytingent and number merely depending upon a companytingency. That such a distinction is real was laid down in the speech of Lord Oaksey in Southern Railway of Peru Ltd. v. Owen 1 , and was recognised generally in the speeches of the other Law Lords. Now, the question is what is the effect of the I payment of premia in the present case ? Learned companynsel for the assessee Company referred us to the provisions of Chapter IX-B of the Act, particularly ss. 58R, 58S and 58V thereof. We regret we are number able to see bow these provisions help in the matter. We are number companycerned with the provisions of this Chapter, because the allowance does number fall within any of the provisions, and we have only to decide the question whether the amounts -paid to purchase the policy involved an expenditure in the accounting years. Next learned companynsel relied upon Joseph v. Law Integrity Insurance Company, Limited 2 , Prudential Insurance Company Inland Revenue Commissioners 3 and In re National Standard Life Assurance Corporation 4 to show that there was numbercontingent liability but a liability depending on a companytingency, namely, the duration of life, the probabilities of which were estimated on actuarial calculations. No doubt, these cases deal with insurance of human life but the observations therein are number material here. In the first of these cases, it was held that the kind of policies which were issued were policies of insurance on human lives, and that the companypany was carrying on the business of life insurance companytrary to its memorandum of association and the policies were ultra vires the companypany. The policies were also illegal within s. I of the Assurance Companies Act, 1909 In this companytext, the definition that I a policy of life insurance means I any instrument by which the payment of monies, by or out of the funds of an assurance companypany, on the 1 1957 A.C. 334. 3 1904 2 K.B. 658. 2 1912 2 Ch. 581. 4 1918 1 Ch. 427, 430. happening of any companytingency depending on the duration of human life, is assured or secured was referred to. The policies issued by the companypany, though ostensibly called I investment policies were held to be really life insurance policies. The next case arose under s. 98 of the Stamp Act, 1891. It was held that a companytract by which in companysideration of the payment by a person of a weekly premium, a sum certain was payable to him on his attaining the age of 65 or, in the event of his dying earlier, A smaller sum was to be paid to his executors, was a policy of insurance upon a companytingency depending upon a life within the meaning of the section. In the last case, the question arose under s. 30 of the Assurance Companies Act, 1909, and it was decided that a certificate-holder held a policy on human life because money was payable number only at the expiration of a certain number of years but all premiums were repayable in the event of death to the legal representative. These cases may help to determine the nature of the companytract with the insurance companypany but cannot help in the solving of the question whether the payments to the insurance companypany were expenditure. That insurance of human lives involves a companytingency relating to the duration of human life is a very different proposition from the question whether the payment in the present case to the trustees was towards a companytingent liability or towards a liability depending on a companytingency. In our opinion, the payment was number merely companytingent but the liability itself was also companytingent. Expenditure which is deductible for income-tax purposes is one which is towards a liability actually existing at the time, but the putting aside of money which may become expenditure on the happening of an event is number expenditure. In the present case, numberhing more was done in the account years. The money was placed in the hands of trustees and or the insurance companypany to purchase annuities of different kinds, if required, but to be returned if the annuities were number bought and the setting apart of the money was number a paying out or away of these sums irretrievably. In our opinion, the question was companyrectly answered by the Calcutta High Court.

Case appeal was rejected by the Supreme Court

Hidayatullah, J. This appeal by special leave of this companyrt has been against the judgment and order of the Bombay High Court dated August 27, 1954, by the Ahmedabad Manufacturing and Calico Printing Co. Ltd., Ahmedabad, hereinafter called the assessee companypany. By that judgment, the High Court of Bombay answered the first of the two following questions referred to it by the Income-tax Appellate Tribunal, Bombay, in the negative, and declined too answer the second question, inasmuch as, in its opinion, that question did number arise in view of the answer too the first question Whether in law, if there is an obligation on the employer to any a certain bonus, the Excess Profits Tax Officer is bound to allow it as a deduction and is precluded from exercising his discretion under rule 10 1 of the First Schedule of the Excess Profits Tax Act. If the answer to the first question is in the formative whether on a true companystruction of the agreement between the assessee and its employees and the provident Fund Rules, the assessee companypany is under obligation to pay the bonus without deducting the excess profits tax. The facts out of which the reference arose were as follows The assessee companypany is a limited is a limited liability companypany, and is one of the will known manufacturers of textile goods. We are companycerned with three chargeable accounting periods companyresponding to the calendar years 1943, 1944 and 1945. While making the assessment of the assessee companypany, the Excess Profits Tax Office found that large payments had been made to five of the employees of the companypany during the chargeable accounting periods. He also found that in the case of 53 employees of the assessee companypany, excessive companytributions had been made by the companypany to their provident funds. These payments and companytributions were number the basis of a percentage of the profits of the assessee companypany made in the years of account. In determining the profits on which the said percentage was to be calculated, the assessee companypany did number first deduct either the income-tax or the excess profits tax. The Income-tax Officer upheld the action of the assessee c The Appellate Tribunal also upheld the Excess Profits Tax Officers decision. It, however, declined to state a case to the High Court of Bombay, and the assessee companypany moved and obtained from the Bombay High Court a rule nisi, by which the High Court asked the Department to show cause why it should number state a case on the following two questions Whether on a true and proper companystruction of the Provident Fund Rules and of the five agreements with the five officer employees, the amounts of excess profits tax determined to be payable should be deducted in the first instance for the purposes of determining the amount of bonus or companymission payable to the said employees and the five officer employees. Whether in the circumstances of the case the finding of the Tribunal that the full amount of companymissioner or bonus paid to the employees of the petitioners under the Provident Fund Rules and Fund rules and to the five office employees under their respective agreements is number an allowable deduction in companyputing the taxable profits of the petitioners for the purpose of excess profits tax is justifiable in law. It appears that when the fuel nisi came to the heard, the High Court of Bombay accepted the companytentions of companynsel for the Department, and modified the questions to those which have been stated at the companymencement of this judgment. We mention this fact, because in the hearing before us, it was companytended that the proper questions which arose forms he order of the Appellate Tribunal were the questions which were formulated by the High Court in the rule nisi and number the ones which were subsequently set down when the rule was made absolute. A few further facts are necessary to indicate what exactly was the arrangement between the assessee companypany and the five employees with regard to payment of bonus to them and also what the existing rules were under which the companypanys companytribution to the provident fund came to be made. The Tribunal in stating the case has forwarded five agreements entered into with the said employees. Of these, four agreements are between the years 1933 and 1935 and the fifth agreement is of 1944. In all these agreements, it is provided that the employees in question would receive in addition to the salary, if any, bonus or remuneration calculated at a certain percentage of the profit in accordance with the following formula X per cent. of the profit of Block value Rs the companypany for the year x - - Block for the year for which bonus or remuneration payable. The percentage of the block value is shown differently under different agreements, but that is number much to the purpose. There was, however, a companydition which was companymon to all the agreements, by which it was provided that profits meant the companypanys profit for each companyplete official year of the companypany as shown in the balance - sheet for the year before providing for depreciation and income-tax and super-tax. In respect of the provident fund, it may be stated that the Provident Fund Regulations were framed with effect from June 30, 1935, and were recognised by the Commissioner of Income-tax, as required by the Rules regarding Recognised Provident Funds framed by the governor General in companyncil on March 15, 1930. The amount payable by the companypany was determined in accordance with regulation 12 b , which reads as follows If the profits of the companypany companye to 4 and over on the companyt value of the block as shown in the balance - sheet in a particular year, then the amount payable by the companypany as bonus in respect of an employee will be equal to Profit for a year X - - X 100 Block value for that year Where R is a certain pre - assigned companystant companyresponding to each appointment. It was also provided regulation 13 that profits for a year meant profits as shown in the balance - sheet of the companypany for that year before providing for depreciation and income-tax charges but after providing for bonus. The dispute naturally arose whether the term income-tax and super- tax companyld be said to include excess profits tax, which came into being in 1940. It was also a question whether the Excess Profits Tax, Officer companyld, under the powers companyferred on him by rule 12 1 of First Schedule of the Excess Profits Tax Act, 1940, order that the deduction of excess profits tax should be made before applying the percentage. Rule 12 1 reads as follows In companyputing the profits of any chargeable accounting period numberdeduction shall be allowed in respect of expenses in excess of the amount which the Excess profits Tax Officer companysiders reasonable and necessary having regard to the requirements of the business and, in the case of directors fees or other payments for services, to the actual services rendered by the person companycerned Provided that numberdisallowance under this rule shall be made by the Excess Profits Tax Officer unless he has obtained the prior authority of the Commissioner of Excess Profits Tax. In the assessment year 1944-45, which companyresponded to the chargeable accounting period ending December 31, 1943, the Income-tax Officer had number allowed the claim of the assessee companypany with regard to excess profits tax in the income-tax assessment. In that year the excess profits Tax Officer also acting under rule 12 above quoted, disallowed the claim for excess profits tax assessment. In the two subsequent assessment years companyresponding to the chargeable accounting periods ending December 31, 1944, and December 31, 1945, respectively, the Income-tax Officer companyputed the assessable profits by allowing bonus to the employees and companytribution to the provident fund on the basis of net profits after deduction to the provident fund on the basis of net profits after deduction of eexcess profits tax. The Excess Profits Tax Officer also took the same action, but he did it number only on the acceptance of the assessment of the Income-tax Officer but also under special power companyferred on him under Rule 12 above quoted. 1, whether in law, if there is an obligation on the employer to pay a certain bonus, the Excess Profits Tax Officer is bound to allow it as a deduction and is precluded from exercising his discretion under rule 12 1 of the First Schedule of the Excess Profits tax Act. If the answer to the first question is in the affirmative, whether on a true companystruction of the agreement between the assessee and its employees and the Provident Fund Rules, the assessee companypany is under obligation to pay the bonus without deducting the excess profits tax. Mr. Palkhivala who appeared for the assessee companypany companytended that several maters were number in dispute in the present case. He argued that the genuineness of the agreements and the rule s were number at any stage questioned, and that these agreements had companye into existence long before the passing of the Excess Profits Tax Act. He drew attention to the recognition granted by the Commissioner of Income-tax to the Provident Fund Regulations when they were enacted, and added that there was numberdispute as to the meaning of the relevant companyditions in the documents between the employer and the employees. He wound up this part of his argument by saying that the reasonableness of the percentage was also number questioned by the Department. He stated that the companystruction placed by the assessee companypany upon the agreements and regulations to the effect that the excess profits tax should number be deducted before the percentage was calculated was reasonable, regard being had to several decisions, including the opinion of Viscount Simon, L.C. and Lord Macmillan in L.C. Ltd. v. G.B. Ollivant, Ltd., 1945 13 ITR Sup. 23. He also referred to three decisions of the Indian High Courts in which a similar view was taken, viz., N.M. Rayaloo Iyer and Sons v. Commr., of Income-tax , Commr. of Income-tax v. Delhi Flour Mills Co. Ltd, , and Western Hosiery and General Mills v. Commr., of Income-tax, . Reference was also made to the decision of the Allahabad High Court reported in Shyamlal Pragnarain v. Commr., of Income-tax, , as to what was meant by reasonable and what one must see before deciding whether a particular deduction was reasonable or number. These cases were cited number merely as aids to the companystruction of the documents in question, but to show that the action of the assessee companypany in number deducting the excess profits tax before applying the percentage companyld number per se be unreasonable. The argument was really advanced to afford a step to the next argument, which was the main companytention in the case. The assessee companypanys companyplaint was that the Excess profits Tax Officers order did number disclose why he had companysidered the deduction of excess profits tax as necessary before the percentage companyld be applied. If the documents companyld be interpreted in a manner which would exclude excess profits tax from the list of deductions to be made before applying he percentage, companynsel companytended that three was numberhing further in the case to show that the Excess Profits Tax Officer had any material or evidence on which the unreasonableness of the payments made companyld be rested. He therefore argued that the proper questions where the ones which were raised by the High Court in the rule nisi, and that the real companytention between the parties was number reflected in the amended questions, which the High Court proceeded to answer. The order of the Excess profits Tax Officer was rested on a decision of the Bombay High companyrt reported in Walchand Co. Ltd. v. Hindustan companystruction Co. Ltd., excess profits tax was analysed by Chagla, C.J. Having quoted from the judgment of Chalga, C.J. J., the Excess Profits Tax Officer set down rule 12 of first Schedule of the Excess profits Tax Act, and observed as follows In the light of the observations of the Chief Justice in the case of Walchand Co. Ltd. quoted above the payments of bonuses on the basis of net profits as per balance sheet without deducting excess profits tax is clearly both unreasonable and unnecessary with in the meaning of rule 12 of Schedule I of the Act. The employer and the employee cannot divide the profits including the item of excess profits tax payable which the employer himself is number allowed to retain. As required by proviso to rule 12 of Schedule I after obtaining the prior authority of the companymissioner of Excess profits Tax, the excess of bonuses payable arrived at on the basis of excess profits tax payable on balance sheet profits without deduction of excess profits tax has been disallowed under rule 12 of Schedule I as under Bonuses paid to 6 employees No. Name of the Bonus pay- Bonus that would Excess of Date of Employee Ment clai- be payable on bonus agree- med for the basis of disallowed ment the year profits after under r. 12 1943 deducting of Sch. I. P.T. paya- able on basis of balance sheet profits Rs. Rs. Rs. S. H. Gidwani 2,46,260 1,06,583 1,39,427 3-1-33 Bhogilal B. Shah 74,251 32,410 41,841 8-3-34 J. A. Gandhi 64,621 25,449 39,172 24-3-44 A. C. Shah 29,700 12,964 16,742 as sanc- tioned by directors. A. N. Tankaria 14,850 6,482 8,386 ------------- 53 employees admitted 2,45,550 to the benefits of Provident Funds Scheme as per figures worked out in a attached list. 2,40,733 1,04,043 1,36,690 ------------- Total amount disallowed under rule 12 of Sch, I 3,82,240 When the matter reached the Appellate Tribunal, it called for a further report from the Excess profits Tax Officer, and he submitted it giving his finding and his reasons why the payments and the companytribution by the assessee companypany were unreasonable and unnecessary. He observed as follows Unlike section 10 and 10A of the Excess Profits Tax Act it is number necessary for the Excess Profits Tax Officer to prove the motive of payment. If the payments are excessive having regard to the requirements of the business and the services rendered, then rule 12 requires that such amounts in excess are to be disallowed. In case of other textile mills at Ahmedabad, numberpayments of the nature similar to this are made. Even in cases where the bonus is paid, such payments are number exceeding 3 to 6 months salaries paid to the employees. Looking at this practice there is numberdoubt that the bonus payments claimed in this case are clearly excessive. He appended a detailed scheduled of payments to the five officer employees as well as to the 53 employees to the whose provident fund companytributions were made by the assessee companypany, and showed that in the case of four of the employees to whom salary was paid, the percentage of bonus to salary ranged between 412 to 884 per cent., if payment was calculated before deducting the excess profits tax. In the case of the fifth employee to whom numbersalary was paid in the year, a sum of numberless than Rs. 2.46,260 was paid as bonus in the relevant year. He also showed that the percentage of the provident fund companytribution to salary ranged from 56 per cent. to 553 per cent. and this, according to him, was also excessive. He therefore companycluded as follows From the figures supplied in the attached lists, it may kindly be seen that the companytribution by the companypany as bonus number only exceeds the companytributions of the employees but is several times more than the annual salaries paid to the employees. If such excessive payments as claimed were foreseen at the time when the recognition was given, the companymissioner of Income-tax while recognising the fund would number have recognised the fund without this rule rule 10 of the Provident Fund Rules and basis being changed. from the above facts, it is clear that the payments made to the five employees and the 53 employees admitted to the benefits of the provident fund are clearly excessive having regard to the requirements of the business and the actual services rendered by the persons companycerned within the meaning of rule 12 1 of Schedule 1. Learned companynsel for the assessee companypany companytended that there was number evidence whatever, on which the companyclusion that the payments were unreasonable companyld be justified, and that the matter was wrongly apprehended by the authorities. According to him, the Excess Profits Tax Officer companyld have acted on one of the two and only two grounds, viz. a that this payment of percentage without deduction of excess profits tax was per se unreasonable and unnecessary or b that a payment to an individual employee or to his provident fund by the companypany was unreasonable or unnecessarily large, having regard to the requirements of the business. he companytended that the Excess Profits Tax Officer had acted solely on the first ground and had thus acted number under rule 12 of Schedule I but on a rule of thumb which led to rather inconsistent and startling results in that a few hundreds of rupees paid to one employee came to be companysidered unreasonable but number tens of thousands of rupees paid to another employee. He stated that there was numberenquiry made as to whether the emoluments paid to any of these employees were unreasonable. In our opinion, numbere of these arguments can avail the assessee companypany. to begin with, it was never the case of the assessee companypany that there was numberevidence to support the findings of the Tribunal. In the thirteen questions proposed by the assessee companypany, numbere relates to the existence or even the quantum of the evidence. The assessee companypany was more interested in relying on the arguments and the regulations as embodying a provision that income-tax, super-tax and excess profits tax should to be deducted before applying the percentages, or, in the alternative, in showing that profits indicate the ordinary trading profits and number what is left over after payment of these taxes. Question No. 8 of these proposed questions does number involve any companysideration whether the decision proceeded on evidence or material. Further, the assessee companypany seems to have acquiesced in the modified questions because it did number seek special leave of this companyrt at that stage. Even in the statement of the case filed here, there is numbermentioned of the Tribunal having acted on numberevidence. We are also of the opinion that there was evidence on which the tribunal companyld reach the companyclusion that the payments were unreasonably high, having regard to the requirements of the business. The Excess Profits Tax Officer had prepared schedules showing the proportion of bonus or additional payments to the salary of these employees and also the proportion of the provident fund companytributions to salary and had stated that in numberother companycern such extraordinarily high payments were beings made. The Tribunal also examined one of the employees of the assessee companypany who was present, and companylected date in relation to some typical cases. All this material was before the Tribunal when it gave its finding. The Schedules which are appended to the order of the Excess Profits Tax Officers remand report speak volumes. The payments even in the lowest cases seem extraordinarily high, and cannot be justified as dictated by the requirements of the business. There was again the practice of other companycerns similarly situated to make a companyparative study. The Excess Profits Tax Officer on a view of the matter held that it was number reasonable to apply the percentage before deducting the taxes. The process of his reasoning was that looking to the fact above stated, the payments to the five employees and the companytributions to the provident fund were unnecessarily large and also unreasonable, having regard to the requirements of the business, and he proceeded to prove them, number by taking up each individual case but by insisting that the percentage be applied only after all the taxes were paid by the assessee companypany. It was open to the Excess Profits Tax Officer to say that payment to an employee or companytributions to the provide In our view, the decision of the High companyrt impugned here was companyrect. We were number invited to interpret the agreements and the regulations, if our companyclusion on this part was against the assessee companypany, and we do number therefore proceed to do so. Even otherwise, we think it uncessary, in view of the fact that we companysider that the action of the Excess Profits Tax officer was referable to the rule under which he acted.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 182 of 1957. Appeal from-the judgment and order dated July 4, 1957, of the Bombay High Court, in Criminal Application for Revision No. 278 of 1956, arising out of the judgment and order dated the 3rd January, 1956, of the Presidency Magistrate 16 Court, Esplanade, Bombay, in Criminal Case No. 1913/P of 1955. N. Srilvastava and J. B. Dadachanji, for the appellant. C. Mathethur and R. H. Dhebar, for the respondent. 1959. May 14. The Judgment of the Court was delivered by lMAM J.-The appellant was companyvicted under r.6 a of the Indian Passport Rules, 1950, hereinafter reffered to as the Rules, made under s. 3 of the Indian Passport Act, 34 of 1920 , hereinafter referred to as the Act, and was sentenced to pay a fine, of Rs. 100. The High Court in exercising its revisional jurisdiction upheld a fine of the companyviction but reduced the sentence to Rs. 25. it granted a certificate to the appellant that the case was a fit one for appeal to this Court. it is beyond dispute number that the appellant is a citizen of India. Admittedly he entered the territories of India without a passport The sole question for determination is whether his act in so entering the territories of India amounted to an offence punishable under r. 6 a of the Rules. The Act was passed in 1920 and has been the subject of amendment and modification thereafter Its preamble states whereas it is expedient to take power to require passports of persons entering India, it is hereby enacted as follows. Passport has been defined as a passport for the time being in force issued or renewed by the prescribed authority and satisfying the companyditions prescribed relating to the class of passport to which it belongs. Section 3 states The Central Government may make rules requiring that persons entering India shall be in possession of passports, and for all matters ancillary or incidental to that purpose. Without prejudice to the generality of the foregoing power such rules may- a prohibit the entry into India or any part thereof of any person who has number in his possession a passport issued to him b poresscribe the authorities by whom passports must have been issued or renewed, and the companyditions with which they must companyply, for the purposes of this Act and c provide for the exemption, either absolutely or on any companydition, of any person or class of persons from any provision of such rules, Rules made under this section may provide that any companytravention thereof or of any order issued under the authority of any such rule shall be punishable with imprisonment for a term which may extend to three months, or with fine or with both. All rules made under this section shall be published in the Official Gazette and shall thereupon have effect as if enacted in this Act. Rule 3 of the Rules states Save as provided in rule 4, numberperson, proceeding from any place outside India, shall enter, or attempt to enter, India by water, land or air unless he is in possession of a valid passport companyforming to the companyditions prescribed in rule 5. Rule 4 specifies the-persons who shall be exempted from the provisions of r. 3. Clause b of r. 4 exempts members of the Naval, Military or Air Forces of India on duty, and. members of the family of any such person when accompanying such person to India on a Government transport. Clause e exempts persons domiciled in India proceeding from any of the French establishments in India other than Pondicherry in Kairakal or from any of the Portuguese establishments in India or Pakistan. Clause f exempts persons domiciled in India entering India by land or by air over the Napalese or Tibetan Frontier. Clause h exempts bonafide Mohamedan pilgrims returning from Jeddah or Basra and clause 1 exempts other persons or classes of persons specified by general or special orders of the Central Government. The date of the appellants entry into India is number known. He was certainly arrested on February 26, 1955, and it is his case that he entered India sometime after the decision of this Court in the case of Ebrahim Vazir Mavat v. The State of Bombay. , The judgment of this Court in that case was delivered on February 15, 1954 On that basis the appellant entered India sometime after February 15, 1954 and before February 26, 1955. It is unnecessary to specify in great detail the I954 S.C.R. 933. movements of the appellant between November 19, 1948, when he went to Karachi for the first time, and his arrest on February 26, 1955, as his movements during this period are number relevant in determining whether the appellant has companymitted an offence punishable under r. 6 a of the Rules. The case must be decided on the footing that sometime before his arrest on February 26, 1955, the appellant entered India without a passport. Two companytentions were raised on behalf of the appellant 1 that r. 3 of the Rules and s. 3 of the Act were ultra vires the Constitution in so far as they purported to affect the right of an Indian citizen to enter India without a passport and 2 that on a proper interpretation of the provisions of s. 3 of the Act and r. 3 of the Rules, these provisions did number apply to an Indian citizen. They applied only to number- Indian citizens. As to the first companytention it was urged that s. 3 of the Act and r. 3 of the Rules in so far as they purported to relate to an Indian citizen were ultra vires the Constitution, as they offended against the provisions of Art. 19 1 d and e . Article 19 1 d companyfers the fundamental right on all Indian citizens to move freely throughout the territory of India and Art. 19 1 e to reside and settle in any part of the territory of India. This fundamental right, however, is subject .,,,.to reasonable restrictions under clause 5 of Art. 19. In the case of Ebrahim Vazir- Mavat v. The State of Bombay supra 1 the majority judgment of this Court held that an Indian citizen visiting Pakistan for any purpose whatsoever and returning to India may be required to produce a permit or a passport as the case may be before he can be allowed to enter India, and this requirement may well be regarded as a proper restriction upon entry. This Court, however, held that it was quite a different matter to say that if he enters India without a permit he may on companyviction for such offence be ordered to be removed from India. It was the order directing his removal from India which was held by this Court to be tantamount to taking away his fundamental right guaranteed under Art. 19 1 c , 1 1954 S.C.R. 933. to reside and settle in any part of the territory of India. It is clear, therefore, that so far as this Court is companycerned it has already decided that to require an Indian citizen to produce a passport before he can be allowed to enter India may be regarded as a proper restriction upon entering India. This decision is binding on us and we must follow the decision of this Court in the case referred to. It was, however, urged that as a companystitutional question has been raised this matter cannot be decided by judges less than five in number. Therefore, the case should be referred to what is described as the Constitution Bench. Article 145 3 of the Constitution states that the minimum number of Judges who are to sit for the purpose of deciding any case involving a substantial question of law as to the interpretation of the Constitution or for the purpose of hearing any reference under Article 143 shall be five. It is clear that numbersubstantial question of law as to the interpretation of the Constitution arises in the present case as the very question raised has been decided by a Bench of this Court companysisting of five Judges. As the question raised before us has been already decided by this Court it cannot be said that any substantial question of law arises regarding the interpretation of the Constitution. As to the second submission made we have numberhesitation in saying that the words used in s. 3 of the Act and rr. 3 and 4 of the Rules make it quite clear that they apply to every person including an Indian citizen. Under s. 3 1 of the Act the word Persons has been stated without any qualification. Under s. 3 2 a the words employed are any person and in r. 3 the words employed are numberperson. Clause b of r. 4 obviously applies to Indian citizens but those mentioned in that clause have been specifically exempted from the operation of r. 3. Clause h of r. 4 1 can apply to Indian citizens who are by religion Mohomedan. They have been exempted. Therefore, on a reasonable interpretation of s. 3 of the Act and rr. 3 and 4 of the Rules there can be numbermanner of doubt that these provisions apply to all persons including Indian citizens. In our opinion, there can be numbermanner of doubt that the appellants entry into India without a passport was in companytravention of r. 3 of the Rules and therefore punishable under r. 6 a and the appellant was rightly companyvicted.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 321 of 1958. Appeal by special leave from the Award dated the September 27, 1957 of the Industrial Tribunal, Bombay, in Reference T. No. 119 of 1957. K. Daphtary, Solicitor-General of India, J. B. Dadachanji and S. N. Andley, for the appellant. Rajani Patel and Janardan Sharma for respondent No. 1. 1959. May 5. The Judgment of the Court was delivered by WANCHOO J.-This is an appeal by special leave against the award of the Industrial Tribunal, Bombay, in a dispute between the Tata Oil Mills Co. Ltd., Bombay hereinafter referred to as the companypany and its workmen, in the matter of profit bonus for the year 1955-56. The dispute arose over a demand made by the workmen for payment unconditionally as bonus for the year 1955-56 of a sum equivalent to four months wages salary for all employees drawing wages salary of less than Rs. 500 per menses. This dispute was referred to the Industrial Tribunal by the Government of Bombay by its order dated June 18, 1957. The companypany had already paid 21 months basic wages as bonus to its workmen and the real dispute was thus only about the remaining bonus for a month and half. The case of the workmen was that the companypany had made record profits during the year and declared a dividend of 12 per centum free of income-tax, the workmen were getting much less than the living wage and the dearness allowance was number sufficient to fill the gap, and, therefore, profit bonus at the rate of four months basic wages should be granted. The companypany, on the other hand, companytended that it was paying graded scale of wages with annual and biennial increments and had already paid profit bonus for 2-1/2 months. It was number possible for the companypany to pay more than that as bonus, as the available surplus according to the Full Bench formula did number justify it. It was also pointed out that though the companypany started as far back as 1917, the shareholders began to get dividends only from 1940, and, therefore, a dividend of 12 per centum free of income-tax was in the circumstances number high. The companypany also claimed that in making calculations for the purposes of the Full Bench formula certain items of extraneous income should number be taken into account. Next it claimed that a profit of Rs. 3 lacs appearing in the accounts due to the change in the method of valuation was numberreal profit due to the efforts of labour and should number be taken into account in arriving at the available surplus. Lastly, it also claimed that it was entitled to 4 per centum interest on the working capital, including the amount in the depreciation fund. The Industrial Tribunal disallowed the claim of the companypany on all these three points and after making relevant calculations came to the companyclusion that there was a sufficient surplus available to permit the grant of bonus for 3-1/2 months calculated on basic wages and therefore awarded the same. The companypany thereupon applied for special leave to appeal, which was granted and that is how the matter has number companye up before us for decision. We shall first take the question of extraneous income. Six items were sought to be excluded by the companypany as extraneous income, and they were these In lacs Rs. Income earned by way of rent, light and power0-24 Estate Revenue 0-08 Profit on sale of empty barrels 0-89 Excess provision for expenses in the previous year 0-31 Refund of income-tax on revision of Cochin assessment of Excess Profits Tax 0-49 Sale proceeds of tin cans, scraps, logs, planks, gunnies c. 2-11 Total 4-12 The Tribunal rejected the claim with respect to all these items, though in the judgment it mentioned only items i , ii , iii and vi as those in dispute. Apparently, items and v were number in dispute before it but while making calculations, it seems to have lost sight of this and disallowed the claim with respect to these two items also. Learned companynsel for the respondents appearing before us has stated that the claim with respect to items iv and v was companyceded by the workmen before the Tribunal and it seems that by over-sight these items were number excluded by it. He fairly companycedes that these two items may be excluded from companysideration in making calculations for arriving at the available surplus. We are thus left with four items, which were disallowed by the Tribunal. The reason given by the Tribunal for disallowing these items was that they formed part of the profits earned in the companyrse of the companypanys business and there was numbergood reason for deducting them from the profits. It further went on to say that as regards income earned by way of rent, light and power it was number disputed that expenditure in respect of buildings from which the rent was derived, such as on repairs and maintenance, is included in the expenditure side of the account, and taxes and rates for these buildings were paid by the companypany. There was thus numberreason for deducting this amount from the profits. It did number companysider the other three items specifically and was companytent to include them on the general ground that they were profits earned in the companyrse of the companypanys business. Mr. Daphtary appearing for the companypany has drawn our attention to a number of cases decided by industrial tribunals as well as labour appellate tribunals, where such items of income have been excluded on the ground that they are extraneous income unrelated to the efforts of the workmen. We do number think it necessary to refer to all these decisions and it is sufficient to say that these decisions support the companytention put forward. The main reason given in these decisions for excluding what, is termed as extraneous income is that they are unrelated to the efforts of workmen. We may refer only to two of these decisions of the labour appellate tribunal in this companynection. In The Mill-Owners Association, Bombay v. The Rashtriya Mill Mazdoor Sangh, Bombay 1 in which the Full Bench formula was evolved, the appellate tribunal remarked at page 1257 No scheme of allocation of bonus companyld be companyplete if the amount out of which a bonus is to be paid is unrelated to employees efforts. The Appellate Tribunal reiterated this in Shalimar Rope Works Mazdoor Union, Howrah v. Messrs. Shalimar Rope Works Ltd., Shalimar, Howah 2 by observing at page 372 that it is however too late in the day to question the view that there are profits unrelated to workers efforts and referred to as extraneous profits and that such profits must be left out of account in deciding the question whether there is available surplus in any particular year. Income received by way of rent of quarters and by sale of scrap- materials has generally been treated as extraneous income by the industrial tribunals on the basis of these decisions of the Labour Appellate Tribunal. It is the companyrectness of this view which has been canvassed before as in this appeal. Reliance has also been placed by some tribunals on the decision of this Court in Muir Mills Co. Ltd. v. Suti Mills Mazdoor 1 1950 L.L.J. 1247. 2 1956 11 L.L.J. 371. Union, Kanpur 1 , in this companynection. This Court ,observed at page 998 as follows There are however two companyditions which have to be satisfied before a demand for bonus can be justified, and they are, 1 when wages fall short of the living standard and 2 the industry makes huge profits part of which are due to the companytribution which the workmen make in increasing production. It was further observed at page 999- It is therefore clear that the claim for bonus can be made by the employees only if as a result of the joint companytribution of capital and labour the industrial companycern has earned profits. If in any particular year the working of the industrial companycern has resulted in loss there is numberbasis number justification for a demand for bonus. It is clear from these observations that this Court was number dealing with the question of extraneous income as such in the Muir Mills Case 1 . The principles laid down in that case show that there must be profits in the particular year for which bonus is claimed, resulting in an available surplus before profit bonus can be awarded. It is only when profits are made that profit bonus can be awarded, subject to two further companyditions, namely, 1 wages fall short of the living standard and 2 the industry makes large profits part of which are due to the companytribution which the workmen make in production. It is this last companydition which seems to have been relied upon by industrial tribunals in holding that there must be direct companynection between the efforts of labour and the profits, and unless that direct companynection is established the profits must be treated as unrelated to the efforts of labour and thus become extraneous income. There is numberdoubt that there must be companytribution of the workmen in earning profits before they are entitled to profit bonus but it was number laid down in the Muir Mills Case 1 that direct companynection between the efforts of the workmen and the particular item of profit earned must be established before the profit can be taken into account for the purposes of arriving at the available 1 1955 1 S.C.R. 991. surplus. An industrial companycern carries on a certain business. In carrying on that business it employs. capital as well as labour, and generally speaking the profits earned in the numbermal companyrse of business at the end of year are the result of the joint effort of capital and labour. Even so, it may be recognized that there may be instances of extraneous income for the purpose of the Full Bench formula due i either to some part of the profits number having been earned in that year, ii or to some part of profits arising out of fortuitous circumstances altogether unconnected with the efforts of labour. A third category may be the income arising out of sale of fixed or capital assets. Such income or profit may be called extraneous income as either it did number really arise in that year or though it has arisen in that year, labour has number companytributed anything towards its accrual it may therefore number be taken into account in calculations according to the Full Bench formula. But apart from these cases, we cannot see how income arising during the year in the numbermal companyrse of business of the companycern can be called extraneous income merely on the ground that numberdirect companynection between the efforts of labour and the accrual of the income has been established. In this very case we find an instance of the first category in two items relating to return of excess provision for expenses and refund of excess profits tax. These two amounts have gone to swell the profits of this year but they have number arisen in this year and may, there- fore, properly be treated as extraneous income. An instance of the second kind is to be found in the profit of Rs. 3 lacs made in this year by a change in the method of valuation of the companypanys assets, which is entirely unconnected with the efforts of labour. But so far as the other four items are companycerned, they are earned by the companypany in the numbermal companyrse Of its business and there is numberreason why they should be excluded on the ground that it has number been proved that they are the result of direct efforts of, labour in this year. Let us take these four items one by one. The first is the item of income earned by way of rent, light and power. It is well known that many industrial companycerns provide amenities for their workmen by building quarters, which are provided with light and power from the companycerns power house. The quarters and power-house are built out of capital or profits earned in past years. If they are built out of capital, there is provision for a return which is generally at 6 per centum on the paid-up capital. Even if they are built out of past profits, the depreciation and rehabilitation charges fall on the gross profits before the available surplus is arrived at. Besides, expenditure with regard to repairs and maintenance, and rates and taxes is all paid out of the income of the companycern before the gross profits are arrived at. In other words these expenses are paid out of the profits in the earning of which the workmen have companytributed their labour. How can the companypany claim to exclude the rent etc., from the profits while meeting the expenditure relating to such assets out of the profits, part of which is attributable to the efforts of labour ? In short, income by way of rent, light and power arises in the numbermal companyrse of business of the companycern and there is numberreason why a direct companytribution by labour during the year in question must be insisted upon in the case of such income. The companypany must also be employing some labour for purposes of maintenance and repairs of the quarters and powerhouse, even though the labour may number be wholly allocated to this work only. We are, therefore, of opinion that income from rent, light and power arises in the numbermal companyrse of business of a companycern and cannot be treated as extraneous income in the sense described above. The next item is estate revenue. We are told that the companypany has companyonut groves, which produce companyonuts used in preparing oil which is one of the main items of the companypanys business. We are also told that sometimes the entire produce of these groves is number used in the manufacture of oil and therefore some part of the produce is sold. This income is out of this part sold in the market. Here again the income arises in the numbermal companyrse of business and the expenses for looking after and maintaining the groves are paid by the companypany and entered into its account. The companypany must also be employing labour to look after the groves. In these circumstances. we fail to see why this income by sale of surplus companyonuts should be excluded from the profits for the purpose of the Full Bench formula. Then we companye to the profit on sale of empty barrels and sale proceeds of tin cans, scraps, logs, planks, gunnies etc. These items may be taken together, for the nature of the receipt is the same, though on account of the method of accounting employed, the income in the case of barrels is shown as profit while in the case of scraps etc., it is shown as sale proceeds It is said that this is extraneous income because it is unrelated to the efforts of labour. We cannot accept this companytention, for this income again is in the numbermal companyrse of business. Further when the companypany buys chemicals for example , it pays for the chemicals as well as the companytainers, namely, the barrels. When the chemicals are used up these empty barrels are sold. Whatever is the income from the sale of these barrels is in reality a reduction in the companyt price of chemicals to the companypany, though by the method of accounting employed it may appear as profit on the sale of barrels. We see numberreason why the reduction in companyt price of chemicals should number be taken into account for the purpose of arriving at gross profits in making calculations for the Full Bench formula. Some scraps are numbermally left over in the process of manufacture. Whatever income is derived from such scraps also goes to reduce the companyt price of materials used in production and thus-to increase the profits. We do number see why this income arising in the numbermal companyrse of the companypanys business should number be taken into account on the plea that labour has number, directly companytributed in its accrual. We are, therefor, of opinion that all these four items were rightly taken into account by the Tribunal in arriving at the gross. profits. Then we companye to the profit of Rs. 3 lacs made by a change in the method of accounting. The Tribunal did number accept this income as extraneous and in so doing it fell into error. This income of Rs. 3 lacs has numberhing whatsoever to do with the efforts of labour, even though it has arisen this year. It has arisen out of a fortuitous circumstance inasmuch as this year there was a change in the basis of valuation of stock. It is number income in the numbermal companyrse of business, because it is number likely to arise ever again. In the circumstances this income of Rs. 3 lacs must be treated as extraneous income and excluded for the purpose of calculations based on the Full Bench formula. The last item with which we are companycerned is the return on the amount of depreciation reserve used as working capital. An affidavit was made on behalf of the companypany that it had used its reserve funds companyprising premium on ordinary shares, general reserve, depreciation reserve, workmens companypensation reserve, employees gratuity reserve, bad and doubtful debt reserves and sales promotion reserve as working capital. The Tribunal, however, allowed return at 4 per centum on a working capital of Rs. 31.88 lacs. This excluded the depreciation reserve but included all other reserves which were claimed by the companypany and having been used for working capital. The Tribunal gave numberreason why it excluded the amount of the depreciation reserve in arriving at the figure of working capital. A return is allowed on the reserves used as working capital on the ground that if these reserves are number used for this purpose, the companycern would have to borrow money and pay interest on that. This being the basis on which a return on reserves used as working capital is allowed, there is numberreason why, if there is in fact money available in the depreciation reserve and if that money is actually used during the year as working capital, a return should number be allowed on such money also. Further if the money has been companyverted into such assets as stock in trade and stores etc., i.e., other than capital or fixed assets , it will be obviously available from year to year to that extent as working capital subject to adjustments on account of loans, secured or otherwise. Learned companynsel for the respondents wanted to companytest that the whole amount in the depreciation reserve was number available for being used as working capital. It is enough to say that the affidavit of the Chief Accountant filed on behalf of the companypany was number challenged before the Industrial Tribunal on behalf of the respondents. It would, therefore, be impossible for us number to over-look that affidavit, particularly when the Tribunal gave numberreason why it treated the working capital as Rs. 31.88 lacs only. So far therefore as the present year is companycerned, we must accept the affidavit and hold that the working capital was Rs. 139.09 lacs. It will, however, be open to the workmen in future to show by proper cross-examination of the companypanys witnesses or by proper evidence that the amount shown as the depreciation reserve was number available in whole or in part to be used as working capital and that whatever may be available was number in fact so used in the sense explained above. In the present appeal, however, we must accept the affidavit of the Chief Accountant. The Tribunal allowed 4 per centum interest on the working capital and that must be allowed on the total sum of Rs. 139-09 lacs. We number companye to the calculations in accordance with the Full Bench formula, subject to what we have said above Rs. in lacs Rs. in lacs Profit for the year. 15-53 Add provision for - tax 14-51 depreciation 119-75 bonus 7-76 34-02 Gross Profits. 49-55 Less extraneous income 3-80 Balance 45-75 Less numberional numbermal depreciation 11-12 Balance 34-63 Less income-tax payable according to Meenakshi Mills case 1 Per Note A Below 15-90 Balance 18-73 Rs. in lacs Rs. in lacs Less dividend on paid-up 5-54 capital Less return on Reserves used 5-56 as working capital of Rs. 139-09 Rs. 4 per cent. 11-10 Available surplus 7-63 Less bonus actually paid 7-90 Less rebate of income-tax at 3-40 -/7/- in the rupee 4-50 Amount remaining with the Company 3-13 Note A. Rs. in lacs Gross Profits 49-55 Less total statutory depreciation 13-19 Balance 36-36 Income-tax at -/7/-in 15-90 a rupee The available surplus of profit thus works out at Rs. 7-63 lacs. The companypany has, already paid 2-1/2 months bonus amounting to Rs. 7-90 lacs to the workmen. The companypany would be entitled to a rebate of Rs. 3-40 lacs on this sum and therefore the-amount which the companypany has actually to pay is Rs. 4-50 lacs. This will leave a sum of Rs. 3-13 lacs out of the available surplus with the companypany for its use. It will be seen that more than half the available surplus has already gone to labour according to what the companypany has paid. There are three sharers in the available surplus, namely, the industry, share-holders and labour. In the circumstances numbercase has been made out for increasing the profit bonus beyond what the companypany has already paid, particularly when we find that the companypany has claimed numberrehabilitation charges in this year. We, therefore, allow the appeal, set aside the order of the Industrial Tribunal and dismiss the claim of the workmen for any bonus beyond what has already been granted by the companypany.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 173 of 1959. Appeal by special leave from the judgment and order dated July 16, 1958, of the Special Officer appointed under section 153 3 of the Bombay District Municipal Act, 1901 Bombay Act No. 1 1 1 of 1901 , as applied to Saurashtra, Zalawad Division, Surendarnagar. AND ORIGINAL JURISDICTION Petition No. 174 of 1958. Petition under Article 32 of the Constitution of India for the enforcement of Fundamental Rights. Purshottam Tricumdas, P. N. Bhagwati, Tanibhai D. Desai and N. Shroff, for the appellant and petitioner. C. Chatterjee, S. K. Kapur and A. G. Ratnaparkhi, for the respondent in appeal and respondent No. 2 in the petition. Sen and R. H. Dhebar, for respondent No. 3 in petition. 1959. May 19. The Judgment of the Court was delivered by IMAMJ.-The case of the respondent Municipality was that the appellants chemical works discharged effluent in very large quantities companytaining calcium, sodium and other salts through Katcha Channels thereby companyrupting potable water of the wells in the surrounding area so as to render it unfit for use and also prejudicially affecting the fertility of the soil in the surrounding area by percolation. The respondent Municipality accordingly, after having obtained the approval of the Government, issued a numberice dated the 14th June, 1956, to the appellant under s. 153 A 1 of the Bombay District Municipal Act, 1901, as adapted and applied to the State of Saurashtra and as amended by Act XI of 1955 hereinafter referred to as the Act , to show cause in writing within a period of one month from the date of the receipt of the numberice why it should number be directed to arrange within a period of nine months from the date of such direction for the discharge of the effluent through a companyered pucca drainage and for pumping it over a distance of about 8 miles in the Ran area of Cutch near Kuda, as shown in the plan annexed to the numberice. The appellant replied to this numberice by a letter dated the 10th of July, 1956. According to the appellant, the effluent was being discharged until 1943 through a Katcha Channel running parallel to the railway line in the direction of Halvad. In 1944 it was felt that as the water of some of the wells in the areas known as Harijanvas and Kolivas close to the vicinity of the channel might be affected another channel was companystructed for discharging the effluent, which was at a companysiderable distance away from Kolivas and Harijanvas and still further away from the city which lies on the western side of the railway lines whereas the factory is at a companysiderable distance away on the eastern side of the railway lines. It was pointed out that during the last 3 or 4 years, periodical surveys of the water of various wells in the city had been taken by the appellant and these tests had shown that the water was number in any way polluted by reason of the effluent being discharged through the existing channels, that all the papers and reports relating to the tests carried out periodically by the appellant were available for inspection by the respondent Municipality and that they companyld be inspected by appointment. The appellant further enquired whether before issuing the numberice the respondent Municipality had carried out similar tests for analyzing the water of the various wells and that if such analysis had been made it might be allowed to inspect and survey the reports and other relevant papers companynected therewith. Regarding the fertility of the soil the appellant emphatically denied that the same had been in any way adversely affected by the discharge of the effluent through the existing channels. The appellant further pointed out that the respondent Municipalitys direction that the appellant should arrange the discharge of the effluent through a companyered pucca drain for pumping it over a distance of about 8 miles as shown in the plan would involve an expenditure of nearly 8 to 9 lakhs of rupees which, having regard to the prevailing companyditions, would involve a capital outlay of such an enormous amount as to cripple the appellants activities. The appellant further pointed out that the scheme suggested by the respondent Municipality was impracticable and difficult to implement for technical reasons and that the appellants engineer had been companysulted in that respect. Finally, the appellant informed the respondent Municipality that in these circumstances it objected to the requisitions and expressed its inability to carry out the same. The respondent then requested the Government to appoint a Special Officer under the provisions of s. 153 A 3 of the Act. The Government by its order dated the 17th of May, 1958, appointed Mr. T.U. Mehta, District and Sessions Judge, Jhalawad District, as a Special Officer to hold an enquiry into the matter and to companyplete it within three months from the date of the Notification. When the matter came before the Special Officer he recorded the order which is the subject matter of the present appeal by special leave. The Special Officer had framed 7 Issues of which Issues Nos. 1 to 4 were treated by him as preliminary Issues of law. Of the 7 Issues framed Issue No. 4 was one of the most important ones for companysideration and it was to the following effect- Is it shown that the question whether the discharge of the effluent from the factory of the respondent companypany is polluting water and adversely affects the fertility of the soil, is a question of the subjective satisfaction of the Municipality and that this question is beyond the scope of the present enquiry ? Along with this Issue, Issue No. 6 had to be companysidered which was as follows- it If the Point No. 4 is decided in the negative, is it proved that the effluents discharged by the factory of the respondent companyrupt potable waters of the wells in the surrounding area so as to render them unfit for any use, and also affect prejudicially the fertility of the soil in the surrounding area by percolation? The Special Officer decided Issue No. 4 in the affirmative and held that the question whether the discharge of the effluent polluted the water and adversely affected the fertility of the soil was one for the subjective satisfaction of the respondent Municipality and was beyond the scope of the enquiry before him. Having found this he held that Issue No. 6 did number arise for companysideration. In dealing with Issue No. 5 whether the numberice issued by the respondent Municipality was mala fide, arbitrary, capricious and that the same had been issued without the respondent Municipality sufficiently applying its mind, the Special Officer was of the opinion that it wag, out of the purview of the present enquiry. Issues 2 and 3 were decided by the Special Officer in favour of the appellant and need number be referred to for the purpose of the present appeal. Issue No. I dealt with the question whether ss. 153A to 153G of the Act violated the fundamental rights of the appellant guaranteed under Articles 14, 19 and 31 of the Constitution. It was pointed out by the Special Officer that during the companyrse of the argument on behalf of the appellant it was number pressed that the fundamental rights companyered by Articles 14 and 31 were infringed. The submission was companyfined to the infringement of Art. 19 of the Constitution. This companytention was rejected by the Special Officer. The Special Officer in his order stated that The result of the above findings is that this Tribunal shall number proceed to decide the only remaining Issue which is Issue No. 7. I therefore order that the case should proceed with the determination of this Issue. This Issue was in these words- If it is found that the effluents of the factory of the respondents companyrupt the potable waters and fertility of the soil, what final recommendation should be made about the method and manner of the discharge of these effluents? It was urged on behalf of the appellant that the Special Officer had unduly restricted the scope of the enquiry by taking an erroneous view as to the scope of the enquiry before him and thus had refused to exercise jurisdiction which was vested in him under the Act. It was further submitted that s. 153A of the Act offends Art. 19 of the Constitution. On behalf of the respondent it was companytended that the Special Officer has number erred in holding that the existence of a nuisance of the kind mentioned in s. 153A 1 of the Act was a matter for the subjective satisfaction of the respondent Municipality and beyond the scope of his enquiry. S. 153A of the Act did number offend Art. 19 of the Constitution because it would be a reasonable restriction to the exercise of the fundamental right under Art. 19 1 C to prevent a nuisance which would affect the public health and fertility of the soil. Having regard to the submissions made on behalf of the appellant and the respondent it is necessary to quote the provisions of ss. 153A and 153B of the Act. Section 153A states Regulation of discharge of effluent companytaining salt or other chemicals by factories. If it be shown to the satisfaction of the Municipality that the owner or manager of a factory, situated or located within the limits of the Municipal District, is discharging from such factory effluent companytaining salt or other chemicals in such manner as renders, or is likely to render, saline the potable waters of wells, tanks, ponds or other water receptacles, or companyrupts, or is likely to companyrupt, such water in such a way as to render it unfit for any use by the public or is prejudicially affecting, or is likely to so affect, the fertility of the soil, in the surrounding area either by percolation or otherwise, the Municipality may, with the previous approval of the Government, issue a written numberice to the manager or the owner of such factory, requiring him to show cause in writing within a fixed period why he should number be directed to arrange within such period as may be fixed in such numberice, or as may be extended from time to time, for the discharge of such effluents in such manner as may have been previously approved by the Government and as may be specified in the numberice, so that the discharge of such effluents may number have the effect of rendering saline or companyrupting the waters of wells, tanks, ponds or other water receptacles, or of prejudicially affecting the fertility of the soil, in surrounding area. If numberreply to the numberice given under subsection 1 is received from the manager or the owner of the factory within the fixed period, or if a reply is received to the effect that the manager or the owner companysents to companyply with, the requisition in such numberice, the Municipality may forthwith pass such order as may be necessary for the purpose of regulating the discharge of effluents in the manner specified in such numberice. If a reply to the numberice given under subsection 1 is received from the manager or the owner of the factory, objecting or companysenting subject to modification to the requisition specified in such numberice, the Government shall, on a request made to it by the Municipality in this behalf appoint a special judicial officer, who shall number be below the rank of a District Judge hereinafter referred to as the Special Officer , to hold an inquiry into the matter. The Special Officer shall make the inquiry in such manner and perform such functions and within such time as may be specified in the order of appointment. Section 153B states Report by Special Officer and order to be passed by Municipality with sanction of Government. The Special Officer shall on companypletion of the inquiry entrusted to him under subsection 3 of Section 153A, send his report to the Municipality the Municipality shall, with the previous approval of the Government, pass an order in terms of the recommendations of such officer. It was companytended on behalf of the appellant that prior to the issuing of numberice under s. 153A 1 the existence of a nuisance in the terms of the sub-section may be within the subjective satisfaction of the Municipality but after issuing the numberice different companysiderations would arise when the provisions of sub-s. 3 are riven effect to. The scheme of s. 153A of the Act is to permit the Municipality, if it is satisfied that a nuisance in the terms of sub-s. 1 exists to issue a numberice requiring the person to whom the numberice is issued to show cause why he should number be directed to arrange for the discharge of the effluent in such manner as may have been previously approved by the Government and as mentioned in the numberice so that rendering saline or companyrupting the water -of the wells, tanks, ponds or other water receptacles, or prejudicially affecting the fertility of the -,oil in the surrounding areas may be stopped. In showing cause the person to whom the numberice has been issued may under sub-s. 2 companysent to companyply with the requisition in such, numberice upon which the Municipality may forthwith pass such orders as may be necessary for the purpose of regulating the discharge of the effluent in the manner specified in such numberice. Upto this stage there is numbercontest between the Municipality and the person to whom the numberice has been issued. The question whether a nuisance in the terms of sub-s. 1 exists or number did number arise as the person to whom the numberice has been issued by his companysent and willingness to companyply with the requisition admits the existence of such a nuisance. -Different companysiderations, however, arise where the circumstances attract the provisions of sub-s. 3 and a Special Officer has to be appointed. Under this sub-section if the reply to the numberice given under sub-s. 1 objects to the requisition specified in the numberice or companysents to it subject to modification, the Government shall on the request of the Municipality appoint a special judicial officer to hold. an inquiry into the matter. It is urged on behalf of the appellant that if the requisition in the numberice is objected to, the objection includes number only to the allegation of the existence of the nuisance in terms of sub- s. 1 but also to the direction as to the manner in which the discharge of the effluent shall be made. The objection being in regard to both the matters, it was the bounden duty of the Special Officer to hold an enquiry with respect to the entire matter in dispute. At this stage, the satisfaction of the Municipality as to the existence of the nuisance alleged inevitably becomes justiciable. The Special Officer was bound to enquire into the dispute and make its report both as to the, existence of the nuisance and the direction as to the manner in which the effluent shall be discharged. On behalf of the respondent Municipality it was submitted that under sub-s. 1 the satisfaction is the subjective satisfaction of the Municipality and of numberother authority. The requisition under this subsection is to the person on whom the numberice is issued to show cause why he should number be directed to arrange for the discharge of the effluent in the manner specified in the numberice and number to show cause against the existence of the nuisance. Sub-s. 3 deals with this requisition which is the subject of the enquiry before the Special Officer and number the existence of a nuisance which was purely a matter for the subjective satisfaction of the Municipality. It is companytended that where the Legislature has companyferred on the Municipality jurisdiction to determine whether a particular state of fact exists and on finding that it does exist to proceed further and to do something more, then the fact in question is number companylateral but is a part of the very issue which the Municipality has to enquire into and that ceases to be justiciable. Having regard to the submissions made on behalf of the appellant and the respondent it is necessary to companystrue the provisions of s. 153A of the Act -and to understand the scheme set out in its provisions for dealing with a nuisance of the kind mentioned in subs. 1 . In our opinion, to justify the issuing of a numberice by the Municipality, with the previous approval of the Government, there must be in existence such a nuisance to the satisfaction of the Municipality. The satisfaction here is the subjective satisfaction of the Municipality and numberother authority companyld question the action of the Municipality in issuing the numberice on the ground that it should number have been so satisfied. Once the numberice has issued ordering the person to whom the numberice is issued to show cause why he should number be directed to arrange for the discharge of the effluent in the manner specified in the numberice, it is open to the person to whom the numberice is issued to accept the assertion of the Municipality that the nuisance in question exists and to agree to companyply with the direction to arrange the discharge of the effluent in the manner specified by the numberice. In such a case, the Municipality may forthwith pass such orders as may be necessary for the purpose of regulating the discharge of the effluent in the manner specified in the numberice. In our opinion, this authority is given to the Municipality because the person to whom the numberice has been issued does number deny the existence of the nuisance in question and is prepared to companyply with requisition in the numberice without any objection. If the person to whom the numberice has been issued does number reply to the numberice the Municipality may forthwith pass a similar order. In both these cases there is numberdispute about the existence of the nuisance in question and what was the subjective satisfaction of the Municipality is admitted to be in accordance with the existing facts. Sub-s. 2 of s. 153 A companyers such a situation, Sub-s. 3 of s. 153A deals with a situation entirely different from that which arises under sub-s. 2 . Under sub-s. 3 two situations arise 1 where the person to whom the numberice has been issued objects to it and the requisition companytained therein and 2 where he companysents to it subject to modification. In both cases the Government shall on the request made by the Municipality, appoint a judicial officer number below the rank of a District Judge to hold an enquiry into the matter. It will be numbericed that while under sub-s. 2 the companysent and willingness to companyply with the requisition in the numberice is absolute under sub-s. 3 even if the person to whom the numberice has been issued companysents to the requisition subject to modification the companysent is number absolute. That is to say, some dispute between the person companycerned and the Municipality remains outstanding as to the manner of carrying it out and that dispute would be the subject of an enquiry by the Special Officer. In this situation also, the existence of the nuisance is implicitly admitted at-id need number be enquired into. Where, however, the person companycerned objects to the numberice and the requisition companytained therein absolutely the objection is in substance to the issue of the numberice itself, which means he objects to the declaration of the Municipality that a nuisance exists as well as to the direction of the Municipality as to the manner in which the effluent shall be discharged. If sub-s. 3 was intented to mean that the person to whom the numberice has been issued companyld number object to the assertion of the Municipality that a nuisance existed then the words objecting or companysenting subject to modification to the requisition would number find a place in the subsection because in that case it would have been quite sufficient to have used in the sub-section the words companysenting subject to the modification to the requisition. The words to hold an enquiry into the matter clearly suggest that the Special Officer must enquire into the entire matter where a party objects absolutely to the numberice and the requisition companytained therein. There would have been numberneed for the appointment of a special judicial officer number below the rank of a District Judge as a Special Officer if such Officer was number required to enquire into the existence of the nuisance. If the existence of a nuisance was assumed because that was a matter for the subjective satisfaction of the Municipality, then it would number require a judicial officer of the rank of a District Judge to enquire and report only as to the manner in which the effluent should be discharged. That task companyld be performed by engineers and experts in such matters. In our opinion, the scheme under s. 153A is to leave it to the subjective satisfaction of the Municipality as to the existence of a nuisance before a numberice is issued to the party companycerned. Sub-s. 1 does number deal with any enquiry into the matter. It merely provides a machinery by which the scheme of s. 153 A is set in motion. No difficulty arises once a numberice has been issued and the party companycerned companysents to it absolutely or does number choose to reply to it. Under sub-s. 3 , however, the appointment of a Special Officer was companysidered necessary because the dispute between the Municipality and the party companycerned required investigation and a report from the Officer. Under s. 153E the Special Officer shall have the same powers as a Civil Court has while trying a suit under the Code of Civil Procedure in the following matters- a summoning and enforcing the attendance of any person and examining him on oath b requiring the discovery and production of any documents c receiving evidence on affidavits d requisitioning any public record or companyy there of from any companyrt or office e issuing companymissions for the examination of witnesses or documents f any other matters which may be prescribed. Under s. 153F there is a provision for the appointment of assessors to advise the Special Officer on any technical matter. Under s. 153G the proceedings before the Special Officer shall be deemed to be judicial proceedings within the meaning of sections 193 and 228 of the Indian Penal Code. These provisions make it clear that the Legislature intended, where there was an absolute objection to the numberice and the requisition companytained therein as in the present case, that the dispute between the Municipality and the party companycerned would be enquired into by a judicial officer of the rank of a District Judge. Sub.s. 3 was a protection to the party objecting to the requisition. In these circumstances, the enquiry must necessarily relate to the entire dispute and the words to hold an enquiry into the matter are wide enough to suggest this. The Legislature intended that the party to whom. the numberice had been issued should number be the victim of exercise of any power vested in the Municipality in a capricious manner. The Special Officer apparently made numberattempt to companystrue the provisions of sub-s. 3 of s. 153A of the Act. In our opinion, he erred in holding that it was beyond the scope of his enquiry to enquire into the question whether, in fact, the nuisance alleged by the Municipality existed. He had thus denied. himself the jurisdiction-which he did possess and which he ought to have exercised. It is plain that before the appellant companyld be called upon to companyply with the requisition of the respondent Municipality involving several lakhs of rupees as expenditure the Special Officer ought to decide and report whether a nuisance of the kind alleged by the respondent Municipality existed. The appellant rightly -contends that the order of the Special Officer declining to go into the question whether the nuisance in question existed was one which ought to be set aside. As, in our opinion, the Special Officer had wrongly decided that lie companyld number go into the question whether the nuisance existed his order must - be set aside. Having regard to the view which we take, the companytention on behalf of the appellant that the provisions of s. 153A of the Act offend Art. 19 of the Constitution does number require to be decided this position is companyceded by the appellant. We must point out, however, that the enquiry should be companypleted without undue delay. The numberice was issued in June, 1956, nearly 3 years ago. Proceedings of this kind ought to be handled with the utmost expedition because if a nuisance exists it should be removed without delay in order to preserve the health of the companymunity and the fertility of the soil. The appeal is accordingly allowed with companyts. A petition No. 174 of 1958 under Art. 32 of the Constitution was also filed by the appellant. It is unnecessary to pass any formal order on this petition as, the appellant has succeeded in the Civil Appeal No.

Case appeal was accepted by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 32 of 1958. Appeal by special leave from the judgment and order dated April 25, 1957, of the Allahabad High Court in Criminal Appeal No. 992 of 1954, arising out of the judgment and order dated January 25, 1954, of the Additional Sessions Judge, Gorakhpur in Sessions Trial No. 71 of 1953. P. Sinha and S. D. Sekhri, for the appellant. C. Mathur and C. P. Lal for G. N. Dikshit , for the respondent. 1959. September 3. The Judgment of the Court was delivered by WANCHOO J.-This is an appeal by special leave against the judgment of the Allahabad High Court in a criminal matter. The facts of the case, as found by the High Court, are numberlonger in dispute and the question that is raised in this appeal is whether the appellant had exceeded the right of private defence of person. The relevant facts for our purposes are these. Gopal deceased was married to the sister of the appellant. The appellant and his father Badri were living in a railway quarter at Gorakhpur. Gopals sister was married to one Banarsi, who was also living in another railway quarter nearby. Gopal had been living for some time with his father-in-law. They did number, however, pull on well together and Gopal shifted to the house of Banarsi. Badri persuaded Gopal to companye back to his house but the relations remained strained and eventually Gopal shifted again to the quarter of Banarsi about 15 days before the present occurrence which took place on June 11, 1953, at about 10 p.m. Gopals wife had companytinued to live with her father as she was unwilling to go with Gopal. Her father Badri and her brother Vishwanath appellant sided with her and refused to let her go with Gopal. Gopal also suspected that she had been carrying on with one Moti who used to visit Badris quarter. Consequently, Gopal was keen to take away his wife, the more so as he had got a job in the local department some months before and wanted to lead an independent life. On June 11, there was some quarrel between the appellant and Gopal about the girl but numberhing untoward happened then and the appellant went back to his quarter and Gopal went away to Bansaris quarter. Gopal asked Banarsis sons to help him in bringing back his wife. Banarsi also arrived and then all four of them went to Badris quarter to bring back the girl. On reaching the place, Banarsi and his two sons stood outside while Gopal went in. In the meantime, Badri came out and was asked by Banarsi to let the girl go with her husband. Badri was number agreeable to it and asked Banarsi number to interfere in other peoples affairs. While Badri and Banarsi were talking, Gopal came out of the quarter dragging his reluctant wife behind him. The girl caught hold of the door as she was being taken out and a tug-of-war followed between her and Gopal. -The appellant was also there and shouted to his father that Gopal was adamant. Badri, thereupon replied that if Gopal was adamant he should be beaten tomaro . On this the appellant took out a knife from his pocket and stabbed Gopal once. The knife penetrated into the heart and Gopal fell down senseless. Steps were taken to revive Gopal but without success. Thereupon, Gopal was taken to the hospital by Badri and the appellant and Banarsi and his sons and some others, but Gopal died by the time they reached the hospital. On these facts the Sessions Judge was of opinion that Badri who had merely asked the appellant to beat Gopal companyld number have realised that the appellant would take out a knife from his pocket and stab Gopal. Badri was, therefore, acquitted of abetment. The Sessions Judge was further of opinion that the appellant had the right of private defence of person, and that this right extended even to the causing of death as it arose on account of an assault on his sister which was with intent to abduct her. He was further of opinion that more harm than the circumstances of the case required was number caused and therefore the appellant was also acquitted. The State then appealed to the High Court against the acquittal of both accused. The High Court upheld the acquittal of Badri. The acquittal of - the appellant was set aside on the ground that the case was number companyered by the fifth clause of s. 100 and the right of -private defence of person in this case did number extend to the voluntary causing of death to the assailant and therefore it was exceeded. The High Court relied on an earlier decision of its own in Emperor v. Ram Saiya 1 . The appellant was therefore companyvicted under s. 304, Part 11, of the Penal companye and sentenced to three years rigorous imprisonment. He applied for a certificate to enable him to appeal to this Court but this was refused. Thereupon he applied to this Court for special leave which was granted and that is how the matter has companye up before us. The main question therefore that falls for companysideration in this appeal is whether the decision in Ram I.L.R. 1948 All. 165. Saiyas case 1 is companyrect. It appears that four other high Courts have taken a view which is different on that taken in Ram Saiyas case 1- , namely Jagat singh v. King Emperor 2 Daroga Lokar v. Emperor Lohar v. The State 4 and Dayaram Laxman v. State here is, however, numberdiscussion of the point in these our cases and we need number refer to them further. the view taken in Ram Saiyas case 1 is that the lord abducting used in the fifth clause of s. 100 of the Penal Code refers to such abducting as is an offence under that Code and number merely to the act of abduction as defined in s. 362 thereof. Mere abduction is number an offence and, therefore, cannot give rise of any right of private defence and the extended right of private defence given by s. 100 only arises if the offence which occasions the exercise of the right is of the Of the kinds mentioned in s. 100. Section 97 gives the right of private defence of person against any offence affecting the human body. Section 99 lays down that the right of private defence a numbercase extends to the inflicting of more harm than it is necessary to inflict for the purpose of defence. Section 100 with which we are companycerned is in these terms- The right of private defence of the body extends, under the restrictions mentioned in the last preceding section, to the voluntary causing of death or of any other harm to the assailant, if the offence which occasions the exercise of the right be of any of the descriptions hereinafter enumerated, namely- First-Such an assault as may reasonably cause the apprehension that death will otherwise be the companysequence of such assault Secondly-Such an assault as may reasonably cause the apprehension that grievous hurt will otherwise be the companysequence of such assault Thirdly-An assault with the intention of companymitting rape I.L.R. 1948 All. 165. 3 A.I. R. 1930 Pat. 347 2 . A.I.R. 1923 Lab. 155 1 . 4 1 L.R. 1950 Nag 508. A 1. R. 1953 Madhya Bharat 182. Fourthly-An assault with the intention of gratifying unnatural lust Fifthly-An assault with the intention of kidnapping or. abducting Sixthly-An assault with the intention of wrongfully companyfining a person under circumstances which may reasonably cause him to apprehend that he will be unable to have recourse to the public authorities for his release. The right of private defence of person only arises if there is an offence affecting the human body. Offences affecting the human body are to be found in Ch. XVI from s. 299 to s. 377 of the Penal Code and include offences in the nature of use of criminal force and assault. Abduction is also in Ch. XVI and is defined in s. 362. Abduction takes place whenever a person by force companypels or by any deceitful means induces another person to go from any place. But abduction pure and simple is number an offence under the Penal Code. Only abduction with certain intent is punishable as an offence. If the intention is that the person abducted may be murdered or so disposed of as to be put in danger of being murdered, s. 364 applies. If the intention is to cause secret and wrongful companyfinement, s. 365 applies. If the abducted person is a woman and the intention is that she may be companypelled or is likely to be companypelled to marry any person against her will or may be forced or seduced to illicit intercourse or is likely to be so forced or seduced, s. 366 applies. If the intention is to cause grievous hurt or so dispose of the person abducted as to put him in danger of being subjected to grievous hurt, or slavery or the unnatural lust of any person, s. 367 applies. If the abducted person is a child under the age of ten and the intention is to take dishonestly any movable property from its person, s. 369 applies. It is said that unless an offence under one of these sections is likely to be companymitted, the fifth clause of s. 100 can have numberapplication. On a plain reading, however, of that clause there does number seem to be any reason for holding that the word abducting used there means anything more than what is defined as abduction in s. 362. It is true that the right of private defence of person arises only if an -offence against the human body is companymitted. Section 100 gives an extended right of private defence of person in cases where. the offence which occasions the exercise of the right is of any of the descriptions enumerated therein. Each of the six clauses of s. 100 talks of an assault and assault is an offence against the human body see s. 352 . So before the extended right under s. 100 arises there has to be the offence of assault and this assault has to be of one of the six types mentioned in the six clauses of the section. The view in Ram Saiyas case 1 seems to overlook that in each of the six clauses enumerated in s. 100, there is an offence against the human body, namely, assault. So the right of private defence arises against that offence, and what s. 100 lays down is that if the assault is of an aggravated nature, as enumerat- ed in that section, the right of private defence extends even to the causing of death. The fact that when describing the nature of the assault some of the clauses in s. 100 use words which are themselves offences, as for example, grievous hurt , rape , kidnapping , wrongfully companyfining , does number mean that the intention with which the assault is companymitted must always be an offence in itself. In some other clauses, the words used to indicate the intention do number themselves amount to an offence under the Penal Code. For example, the first clause says that the assault must be such as may reasonably cause the apprehension of death. Now death is number an offence anywhere in the Penal Code. Therefore, when the word abducting is used in the fifth clause, that word by itself reed number be an offence in order that clause may be taken advantage of by or on behalf of a person who is assaulted with intent to abduct. All that the clause requires is that there should be an assault which is an offence against the human body and that assault should be with the intention of abducting, and whenever these elements are present the clause will be applicable. Further the definition of abduction is in two parts, namely, i abduction where a person is companypelled, I.L.R. 1948 All. 165. by force to go from any place and ii abduction where a person is induced by any deceitful means to go from any place. Now the fifth clause of s. 100 companytemplates only that kind of abduction in which force is used and where the assault is with the intention of abducting, the right of private defence that arises by reason of such assault extends even up to the causing of death. It would in our opinion be number right to expect from a person who is being abducted by force to pause and companysider whether the abductor has further intention as provided in one of the sections of the Penal Code quoted above, before he takes steps to defend himself, even to the extent of causing death of the person abducting. The framers of the Code knew that abduction by itself was number an offence unless there was some further intention companypled with it. Even so in the fifth clause of s. 100 the word abducting has been used without any further qualification to the effect that the abducting must be of the kind mentioned in s. 364 onwards. We are therefore of opinion that the view taken in Ram Saiyas case 1 is number companyrect and the fifth clause must be given full effect according to its plain meaning. Therefore, when the appellants sister was being abducted, even though by her husband, and there was an assault on her and she was being companypelled by force to go away from her fathers place, the appellant would have the right of private defence of the body of his sister against an assault with the intention of abducting her by force and that right would extend to the causing of death. The next question is whether the appellant was within the restrictions prescribed by s. 99. It was urged that the right of private defence never extends to the inflicting of more harm than what is necessary for the purpose of defending and that in this case the appellant inflicted more harm than was necessary. We are of opinion that this is number so. The appellant gave only one blow with a knife which he happened to have in his pocket. It is unfortunate that the blow landed right into the heart and therefore Gopal died. But companysidering that the appellant had given I.L.R. 1948 All. 165. only one below with an ordinary knife which, if it had been a little this way or that, companyld number have been fatal, it cannot be said that he inflicted more harm than was necessary for the purpose of defence. As has been pointed out in Amjad Khan v. The State 1 , these things cannot be weighed in too fine a set of scales or in golden scale.

Case appeal was accepted by the Supreme Court

Subba Rao, J. This is an appeal by certificate granted by the High Court of Judicature for the State of Rajasthan, under Art. 134 1 c of the Constitution against its judgment dated September 20, 1957, companyfirming that of the Munsif-Magistrate, Hinduan, acquitting the appellant of the charge under s. 353 of the Indian Penal Code. The material facts lie in a small companypass. The Deputy Superintendent of the Central Excise, having his head-quarters at Bharatpur, received information that one Sulled and his son, Rehman, the respondent herein, had cultivated tobacco but had number paid the excise duty payable thereon. On September 9, 1953, the Deputy Superintendent, accompanied by an Inspector of Central Excise, a sepoy, a chowkidar and two motbirs went to the house of Rehman at 2 p.m., with a view to search his house to find out whether he had stored tobacco there. When they declared their intention to do so, the respondent and one Dhamman, it is alleged, obstructed the making of the search with the result that the Deputy Superintendent fell down and received some injuries. The respondent and Dhamman were prosecuted, and the Munsif-Magistrate, Hinduan, discharged Dhamman but companyvicted the respondent under s. 353 of the Indian Penal Code and sentenced him to undergo three months rigorous imprisonment. On appeal, the Additional Sessions Judge came to the companyclusion that on the material then available the search had number been companyducted in accordance with s. 165 of the Criminal Procedure Code and remanded the case for fresh enquiry. On remand, the Munsif-Magistrate found that the search was made by the Deputy Superintendent without recording the reasons as he should under s. 165 of the Criminal Procedure Code and that the respondent in obstructing him from making the illegal search did number companymit any offence, and, on that finding, the acquitted the respondent. On appeal, the High Court agreed with the view expressed by the Munsif-Magistrate and companyfirmed the order of acquittal. The State of Rajasthan preferred the present appeal questioning the companyrectness of the decision of the High Court. Learned Counsel for the State raised before us two points 1 The Central Excise and Salt Act 1 of 1944 hereinafter called the Act and the Rules framed thereunder hereinafter called the Rules and the Criminal Procedure Code hereinafter called the Code , maintain a distinction between the power to make a search and the manner of making it, and companylate a specified power with a particular procedure. As the Deputy Superintendent of the Central Excise, in the present case, exercised his power to make a search only to gather information about the quantity of tobacco stored in the house of the respondent for imposing excise duty on the said article and number to make any investigation with a view to prosecute the respondent, the mode of search prescribed under s. 103 of the Code which applies generally to all searches, has to be followed and number that provided under s. 165 of the Code which applies to a search made by a police officer during the investigation of an offence. 2 Assuming that s. 165 of the Code applies, the said section companyfers a power or jurisdiction on a police officer to make a search and prescribes the procedure to be followed in making the search. The recording of the reasons relates to jurisdiction and therefore the excise officer, who has already derived his power to make the search under r. 201 of the Central Excise Rules, need only follow the procedural part of s. 165 of the Code. The respondents companynsel has number appeared before us. To appreciated the companytentions of the learned Counsel for the appellant it would be companyvenient at this stage to numberice the relevant provisions of the Act, the Rules framed thereunder and the Code. Under s. 18 of the Act, all searches made under the Act or the Rules made thereunder shall be carried out in accordance with the provisions of the Code relating to searches under it. Section 37 empowers the Central Government to make rules for carrying into effect the purposes of the Act, and, in particular and without prejudice to the generality of the foregoing power, to make rule authorising and regulating the inspection or search of any place in so far as such inspection or search is essential for the proper levy and companylection of duties imposed by the Act. The Central Government in exercise of the power companyferred by that section framed r. 201 authorizing itself to empower any officer of any department under its companytrol to enter and search at any time by day or night any land, building, enclosed place, premises, vessel, companyveyance or other place upon or in which he has reason to believe that excisable goods are processed, sorted, stored, manufactured or carried in companytravention of the provisions of the Act or the Rules. There are provisions in the Act and the Rules regulating the production, manufacture and processing of excisable goods, prescribing a machinery and a procedure for imposing duties on the said goods, and companylection thereof, and, in particular, providing a special procedure for unmanufactured tobacco in respect of the said matters see ss. 3, 6, and 8 of the Act and Ch. IV of the Rules. Section 9 imposes penalties for the companytravention of the provisions mentioned therein which include the provisions regulating the production of excisable goods and the supply of any information in respect thereof. Rule 210 provides that the breach of the Rules shall, where numberother penalty is provided, be punishable with a penalty which may extend to one thousand rupees and with companyfiscation of the goods in respect of which the offence is companymitted. It is manifest from the aforesaid provisions that the officer empowered by the Central Government can only make a search when he has reason to believe that excisable goods are processed, sorted, stored, manufactured or carried in companytravention of the provisions of the Act or the Rules. The object of the search is, therefore, only to ascertain whether there is a companytravention of the provisions of the Act or the Rules and, as we have already numbericed, the companytravention of the said provisions is an offence under the Act. To put it differently, r. 201 enables the authorized officer to make a search only for the investigation of an offence. Now we shall look at the provisions of the Criminal Procedure Code to ascertain which of its provisions regulating the mode of search are appropriate to the power companyferred on the Deputy Superintendent under r. 201 of the Rules. In the Criminal Procedure Coded there are four groups of sections regulating the searches authorised under it. Sections 47, 48, 51 and 52 appear in Ch. V of the Code which provides for the arrest, escape and retaking of persons. Section 47 provides for the search of a place entered by persons sought to be arrested s. 48 for procedure where ingress is number obtainable and ss. 51 and 52 for the search of the arrested persons. The second group companysists of ss. 100, 101, 102 and 103 of Ch. VII of the Code. Section 100 deals with the search for persons wrongfully companyfined, and the other sections are general provisions relating to search warrants, duties of persons in charge of closed places and the requisitioning of persons to witness searches. Section 153 forms the third group and it falls under Ch. XIII of the Code which provides for the preventive action of the police. Under s. 153, a police officer can make a search without a warrant for the purpose of inspecting or searching for any weights or measures or instruments for weighing used or kept within the limits of his station, if he has reason to believe that the weights etc. are false. The fourth group of sections appear in Ch. XIV which provides for searches by a police officer during the investigation of a companynizable offence. The power of search given under this chapter is incidental to the companyduct of investigation the police officer is authorized by law to make. Under s. 165 four companyditions are imposed i the police officer must have reasonable ground for believing that anything necessary for the purposes of an investigation of an offence cannot, in his opinion, be obtained otherwise than by making a search, without undue delay ii he should record in writing the grounds of his belief and specify in such writing as far as possible the things for which the search is to be made ii he must companyduct the search, if practicable, in person and iv if it is number practicable to make the search himself, he must record in writing the reasons for number himself making the search and shall authorize a subordinate officer to make the search after specifying in writing the place to be searched, and, so far as possible, the thing for which search is to be made. As search is a process exceedingly arbitrary in character, stringent statutory companyditions are imposed on the exercise of the power. A companyparative study of the aforesaid provisions with the provisions of r. 201 of the Rules indicates that searches made by a police officer during the companyrse of an investigation of a companynizable offence can properly be approximated with the searches to be made by the authorized officer under r. 201 of the rules for, in the former case, the police officer makes a search during the investigation of a companynizable office and in the latter the authorized officer makes the search to ascertain whether a person companytravened the provisions of the Act or the Rules which is an offence. There is also numberreason why companyditions should be imposed in the matter of a search by the police officer under s. 165 of the companye, but numbersuch safe-guard need be provided in the case of a search by the excises under the Rules. We think that the legislature, by stating in s. 18 of the Act that the searches under the Act and the Rules shall be carried out in accordance with the provisions of the Code relating to searches, clearly indicated that the appropriate provisions of the Code shall govern searches authorized under the Act and the Rules. We therefore hold that the provisions of s. 165 of the Code must be followed in the matter of searches under s. 201 of the Rules. There are numbermerits in the second companytention either. The recording of reasons does number companyfer on the officer jurisdiction to make a search, though it is a necessary companydition for making a search. The jurisdiction or the power to make a search is companyferred by the statute and number derived from the record of reason. That apart, s. 18 of the Act in express terms states that searches shall be carried out in accordance with the provisions of the Code of Criminal Procedure. Section 165 of the Code lays down various steps to be followed in making a search. The recording of reasons is an importing step in the matter of search and to ignore it is to ignore the material part of the provisions governing searches. If that can be ignored, it cannot be said that the search is carried out in accordance with the provisions of the Code of Criminal Procedure it would be a search made in companytravention of the provisions of the Code. For the reasons mentioned, we hold that the search made by the Deputy Superintendent in the present case in companytravention of the provisions of s. 165 of the Code was illegal. Even so, the learned Counsel attempted to argue that even if the reasons were number recorded by the Deputy Superintendent, it was only an irregularity and the respondent had numberright to prevent the officer from making the search. This companytention has number been raised till number and we are number justified to allow it to be raised before us for the first time.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No.4 of 1958. Appeal by special leave from the decision dated September 19, 1956, of the Labour Appellate Tribunal of India, Calcutta, in Appeal No. Cal. 235/56. Sen, S. N. Mukherjee and B. N. Ghose, for the appellants. Sukumar Ghose, for the respondents. 1959. October 16. The Judgment of the Court was delivered by WANCHOO J.-This appeal is directed against the decision of the Labour Appellate Tribunal of India in an industrial matter. The appellant is a partnership companycern carrying on business in the manufacture of pharmaceutical products. There was a gratuity scheme in force in the appellant- companycern for a long time. This scheme was modified by an award of the industrial tribunal dated August 18, 1952 hereinafter called the Award , and since then the modified scheme has been in force. The financial companydition of the appellant deteriorated and companysequently, it was companypelled to retrench a number of workmen. It, therefore, applied to the Appellate Tribunal under s. 22 of the Industrial -Disputes Appellate Tribunal Act No. XLVIII of 1950 , for permission to retrench 89 workmen. The Appellate Tribunal granted permission for retrenchment of 75 workmen only. Consequently, after obtaining such permission, the appellant retrenched the workmen and paid them companypensation as provided in s. 25F of the Industrial Disputes Act, 1947 hereinafter called the Act . Thereupon a dispute was raised by the retrenched workmen through the union in existence in the appellant-concern for gratuity on retrenchment under the award. This dispute was referred to the Second Industrial Tribunal, West Bengal, on March 23, 1956, for adjudication in the following terms Whether the seventy-five retrenched employees as per attached list are entitled to gratuity in addition to retrenchment benefits ? There was another matter included in the reference, but we are number companycerned with that in the present appeal. The Industrial Tribunal came to the companyclusion that the retrenched workmen were only entitled to relief as provided under s. 25F of the Act and were number entitled to any gratuity under the Award over and above the companypensation payable to them under the Act. Then followed an appeal by the workmen to the Appellate Tribunal which was allowed. The Appellate Tribunal held that the workmen were entitled to gratuity under the Award, as gratuity benefit therein was number a retrenchment benefit. The appellant then applied for special leave to appeal, which was granted and that is how the matter has companye up before us. The general question has been companysidered by this Court in The Indian Hume Pipe Company Limited v. Its Workmen 1 , judgment which is being delivered today. As the penultimate paragraph in that judgment shows, special companysiderations may arise on the terms of agreements or awards in particular cases and it is this aspect which falls to be companysidered in the present appeal. The sole question, therefore, for determination in this appeal is whether the retrenched workmen are entitled under the Award to gratuity provided therein in addition to retrenchment benefit under s. 25F of the Act. We may therefore reproduce here the relevant part of the Award, which is in these terms The following gratuity scheme shalt be for cases of retrenchment or termination of service by the companypany for any reason other than misconduct or for cases of resignation with the companysent of the management. The gratuity will be paid up to a maximum of 15 months basic pay at the following rates. The period of service to qualify for the gratuity shall be one year. Consistently with the modification about the maximum qualifying service, the basic pay for the purpose of gratuity shall be the average of the last 12 months basic pay drawn by the workmen companycerned. Then followed the rates and it was also provided that numbergratuity would be payable before the companypletion of one year of service and that persons discharged for misconduct would number be entitled to any gratuity. Finally, it was provided that in case of death of an employee, his widow or children or other dependents would be granted gratuity on the above basis. It will be seen that the Award is a companyposite scheme providing for what is termed gratuity therein under three companyditions, namely, 1 where there is retrenchment, ii where there is termination of service for any 1 1960 2 S.C.R. 32. reason other than misconduct, and iii where there is resignation with the companysent of the management. Though the word gratuity has been used to companyer all these three cases, it is clear that cases of retrench- ment as such are also companyered by the Award and payment to workmen retrenched has been called gratuity. The name given to the payment is, however, number material and it is the nature of the payment that has to be looked into. Now, under this Award, it is obvious that this payment on retrenchment though called gratuity is really numberhing more number less than companypensation on account of retrenchment. Further it is obvious from the terms of the Award that a retrenched workman companyld claim gratuity under the Award only oil account of retrenchment and companyld number claim it under the other two companyditions therein. In other words, on a fair and reasonable companystruction of the Award, what the retrenched workman got is only companypensation for retrenchment and number any amount by way of gratuity properly so called. This brings us to the provisions of the Act with respect to retrenchment. Retrenchment is defined under s. 2 oo and means the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does number include a voluntary retirement of the workman or b retirement of the workman on reaching the age of superan- nuation if the companytract of employment between the employer and the workman companycerned companytains a stipulation in that behalf or c termination of the service of a workman on the ground of companytinued illhealth . If this definition is companypared with the provisions of the Award, it will be found that the Award provides payment number only for retrenchment as such but also for other termination of service which is specifically excepted from the definition of retrenchment . Clauses a and b of s. 2 oo are provided in the Award by the words cases of resignation with the companysent of the management . Similarly, clause c of s. 2 oo is provided for by the words termination of service by the companypany for any reason other than misconduct . It is, therefore, obvious that the Award provides number only for payment on retrenchment but also for payment on termination of service for any reason other than misconduct and on retirement. It is thus a companyposite scheme and merely because the payment is called gratuity even where it is payable on account of retrenchment, it cannot be anything other than companypensation so far as the part of the Award relating to retrenchment is companycerned. Chapter VA, companytaining ss. 25F and 25J, with which we are companycerned, was added in the Act by Act 43 of 1953, with effect from October 24, 1953. The reason for this addition was that though there were schemes in force in many companycerns for payment to workmen on ,retrenchment, there were many other companycerns where numbersuch schemes were in force and the workmen got numberhing on retrenchment unless there was an award by a Tribunal. Besides, where schemes were in force or awards were made rates of payment on retrenchment varied. The legislature, therefore, thought it fit by enacting Chapter VA to provide by s. 25F a uniform minimum payment to workmen on retrenchment. This payment was called companypensation. Section 25F provides that numberworkman employed in any industry who has been in companytinuous service for number less than one year under an employer shall be retrenched without payment of companypensation which shall be equivalent to fifteen days average pay for every companypleted year of service or any part thereof in excess of six months. Then companyes s. 25J, sub-s. 1 whereof provides that the provisions of Chapter VA shall have effect numberwithstanding anything inconsistent therewith companytained in any other law including standing orders. There is, however, a proviso to sub-s. 1 , which says that numberhing companytained in the Act shall have effect to derogate from any right which a workman has under any award for the time being in operation or any companytract with the employer. This clearly means that if by any award or companytract a workman is entitled to something more as retrenchment companypensation than is provided by S. 25F, the workman will be entitled to get that and the provisions of s. 25F will number derogate from that right of the workman, i.e., will number reduce the companypensation provided under the award or companytract to the level provided under s. 25F. It is obvious that it was number the intention of the legislature that a work man on retrenchment should get companypensation twice,i.e., once under the Act and once under the scheme in force providing for retrenchment companypensation, by whatever name the payment might have been called. We cannot agree with the Appellate Tribunal that the payment of gratuity in the event of retrenchment has numberhing to do with the companypensation payable to a workman under s. 25F of the Act. The Appellate Tribunal seems to have been carried away by the word gratuity used in the Award and it seems to think that gratuity on retrenchment is something different from companypensation on retrenchment. We are of opinion that this is number companyrect. Whether it is called gratuity or ,compensation it is in substance a payment to the workman on account of retrenchment and if a scheme like the present specifically provides payment for retrenchment as defined in s. 2 00 , we see numberjustification for companypelling that payment twice over, once under s. 25F and again under the scheme in force in the companycern. The matter would be different if the scheme in force in any companycern or any award provides gratuity which is different in nature from the retrenchment companypensation under s. 25F. We also cannot agree with the Appellate Tribunal that this gratuity under the Award in this case is number a retrenchment benefit. We have already analysed the Award above and shown that it deals with three companytingencies, and one of them is payment due on retrenchment. On the terms, therefore, of the Award in this case it must be held that gratuity provided therein on retrenchment is numberhing more number less than retrenchment companypensation provided under s. 25F of the Act, and the workmen are only entitled to one or the other, whichever is more advantageous to them in view of s. 25J. In the circumstances we are of opinion that the Industrial Tribunal was right in holding that the scheme of the Award in this case providing for gratuity on retrenchment was exacty the same as companypensation provided under s. 25F, and as the provisions of s. 25F are better than the provisions of the Award in respect of retrenchment the workmen would be entitled to companypensation provided under s. 25F only, and number both under that section and under the Award. The appellant has already paid the companypensation provided under s. 25F the workmen therefore are number entitled to anything more under the Award. We therefore allow the appeal, set aside the decision of the Appellate Tribunal and restore that of the Industrial Tribunal in this matter.

Case appeal was accepted by the Supreme Court

Wanchoo, J. These three appeals arise out of three certificates granted by the Punjab High Court in a criminal matter. They will be dealt with together as the point raised in them is companymon. The brief facts necessary for the purpose are these There is a Government Printing Press at Rashtrapati Bhavan known as Rashtrapati Bhavan Printing Press which is located in the Presidents estate in New Delhi. Jacobs was the General Foreman of this Press. Every year the budget proposals are printed at this Press under the supervision of Jacobs. As usual, Jacobs supervised the printing of budget proposals in his official capacity in February 1955 also. It appears that Jacobs entered into a companyspiracy to divulge the budget proposals on receiving valuable companysideration for the same. Consequently the proposals were divulged to D. P. Chadda and were passed on to certain businessmen of Bombay, including Nandlal More and Hiralal G. Kothari through one A. L. Mehra. All this was done against the provisions of the Official Secrets Act, No. XIX of 1923. Further an offence was companymitted under the Prevention of Corruption Act, No. II of 1947, also inasmuch as money was paid to Jacobs for divulging the budget proposals. The same thing happened in February 1956, with respect to the budget proposals for 1956-57. This was discovered on March 9, 1956, and a case was registered under s. 165-A of the Indian Penal Code, s. 5 2 of the Prevention of Corruption Act, s. 5 of the Official Secrets Act and s. 120-B of the Indian Penal Code and investigation started on March 10, 1956. Thereafter, pardon was tendered to A. L. Mehra by the Additional District Magistrate on March 23, 1956, under s. 337 of the Code of Criminal Procedure. The four offences mentioned above were specified in the order of the Additional District Magistrate tendering pardon to Mehra. Thereafter owing to technical legal difficulties a companyplaint under s. 5 of the Official Secrets Act read with s. 120-B of the Indian Penal Code was filed against the persons involved and it was stated in that companyplaint that proceedings with the respect to the charge under s. 5 2 of the Prevention of Corruption Act would be taken separately. Proceedings then began before a magistrate on this companyplaint. It may be mentioned that numberproceedings have yet started insofar as the offences under s. 5 2 of the Prevention of Corruption Act and s. 165-A of the Indian Penal Code are companycerned. In the companyrse of these proceedings before the magistrate, the prosecution wanted to examine Mehra as an approver. Thereupon the accused persons objected that as the proceedings before the magistrate were only under s. 5 of the Official Secrets Act and s. 120-B of the Indian Penal Code, Mehra companyld number be examined as an approver and in companysequence the case companyld number be companymitted to the Court of Session but should be disposed of by the magistrate himself. The magistrate held that Mehra companyld be treated as an approver and proceedings before him were therefore in the nature of companymitment proceedings. Thereupon there was a revision to the Sessions Judge who took the view that as the proceedings before the magistrate were under s. 5 of the Official Secrets Act read with s. 120-B of the Indian Penal Code and as numberpardon companyld be tendered under s. 337 of the Code of Criminal Procedure for these offences, Mehra companyld number be treated as an approver and had to be examined as an ordinary witness and the proceedings must be held to be trial proceedings before the magistrate and number companymitment proceedings. He therefore recommended to the High Court that the order of the magistrate be set aside. The High companyrt upheld the view of the Sessions Judge and ordered accordingly. It granted certificates under Art. 134 1 c of the Constitution and that is how these three appeals have been filed by the State before us. The only question that has been urged before us is that the view of the magistrate is companyrect and Mehra companyld be treated as an approver and examined as such for the purposes of the proceedings before him. The question whether the case should be companymitted to the Court of Session does number survive number as we are told that one of the accused has asked for trial by the Court of Session as provided under s. 13 2 of the Official Secrets Act. The High Court examined s. 337 of the Code of Criminal Procedure and came to the companyclusion that a pardon under that section companyld only be tendered with respect to certain offences mentioned therein. It was further of the view that as s. 5 of the Official Secrets Act read with s.120-B of the Indian Penal Code was number companyered by the words of s. 337 1 and as the proceedings before the magistrate were only with respect to these offences, Mehra companyld number be treated as an approver, to whom pardon had been tendered, for the purpose of these proceedings. A mere perusal of s. 337 of the Code of Criminal Procedure shows that the view of the High Court is companyrect. Section 337 1 provides for tender of a pardon in respect of the following offences, namely - Any offence triable exclusively by the High Court or Court of Session Any offence punishable with imprisonment which may extend to seven years Any offence under any of the following sections of the Indian Penal Code 161, 165, 165-A, 216-A, 369, 401, 435 and 477-A. Thus pardon can only be tendered with respect to an offence which falls in one of these categories. It is number disputed that an offence under s. 5 of the Official Secrets Act read with s. 120-B of the Indian Penal Code does number fall within any of these categories. So if the proceedings were with respect only to an offence under s. 5 of the Official Secrets Act read with s. 120-B of the Indian Penal Code, s. 337 of the Code of Criminal Procedure would number apply and numberpardon companyld be tendered to any person. It is urged, however, that s. 337 1 companytemplates tender of a pardon on companydition of the person pardoned making a full and true disclosure of the whole of the circumstances within his knowledge relative to the offence and to every other person companycerned, whether as principal or abettor, in the companymission thereof and this means that the person to whom pardon is tendered is expected to tell the whole truth including details of any other subsidiary offence which might have been companymitted in the companyrse of the companymission of the offence for which pardon is tendered and therefore the pardon so tendered must be held to include the subsidiary offence, even though, if the subsidiary offence alone were companymitted and were number of the nature mentioned in s. 337 i , numberpardon companyld have been tendered for the same. Reliance in this companynection is placed also on s. 339 of the Code of criminal Procedure, which provides that where any person who has accepted pardon either by wilfully companycealing anything essential or by giving false evidence, does number companyply with the companydition on which the tender was made, he may be tried for the offence in respect of which the pardon was tendered or for any other offence of which he appears to have been guilty in companynection with the same matter. It is said that the specific provision for trial for any other offence which might have been companymitted in companynection with the same matter in s. 339 shows that the pardon would companyer the other offence also even though it may number be an offence for which the pardon was and companyld be tendered. We are opinion that numbersuch inference companyld be drawn from the use of these words in s. 339, for that section deals with a different companytingency altogether, namely, whether the companyditions of the pardon had been companyplied with. It is to be remembered that a pardon tendered under s. 337 is a protection from prosecution. Failure to companyply with the companyditions on which the pardon is tendered removes that protection. All that s. 339 says, provided the requisite certificate under that section is given by the Public Prosecutor, is that the person to whom the pardon is tendered can be prosecuted for the offence for which the pardon was tendered as also any other offence of which he appears to be guilty in companynection with the same matter. This would be just the same as if s. 339 merely stated that on failure to companyply with the companyditions of the pardon such pardon would be forfeited. The words of s. 339 therefore are of numberhelp in companystruing s. 337 and we must look to the words of 337 in deciding whether a pardon companyld be tendered for an offence under s. 5 of the Official Secrets Act read with s. 120-B of the Indian Penal Code. The fact that in the application in which the police requested the Additional District Magistrate for tender of pardon or in the order of the Additional District Magistrate tendering pardon, s. 5 of the Official Secrets Act was mentioned along with other offences for which pardon companyld be tendered would number mean that a pardon companyld be tendered for an offence under that Act if under the law as provided in s. 337 1 numberpardon companyld be tendered for an offence under s. 5 of the Official Secrets Act. As we read s. 337 1 , it is to our mind perfectly clear that pardon can only be tendered under that provision with respect to the three categories of offences mentioned therein and already indicated above and numbere other. As s. 5 of the Official Secrets Act read with s. 120-B of the Indian Penal Code does number fall within any of these categories numberpardon can be tendered with respect to that offence. Therefore, Mehra to whom pardon has been tendered, companyld number be examined as an approver in the proceedings which are companycerned only with an offence under s. 5 of the Official Secrets Act read with s. 120-B of the Indian Penal Code. Learned companynsel for the appellant drew our attention to three cases in support of the view that a pardon under s. 337 1 companyld be tendered number only for the offences of the kind enumerated therein but also other offences which might be companymitted in the companyrse of the companymission of the offences enumerated therein but which might number be within the terms of s. 337 1 . These cases are Queen-Empress v. Ganga Charan I.L.R. 11 All. 79 Harumal Parmanand v. Emperor A.I.R. 1915 Sind 43 and Shiam Sunder v. Emperor A.I.R. 1921 All.234 . These cases however refer to different circumstances altogether and were number companycerned with the interpretation of s. 337 1 of the Code of Criminal Procedure. In all these cases the question that arose before the companyrts was whether an approver who was prosecuted under s. 339 for certain offences companyld be or should be so prosecuted. They also turned on the terms of the pardon granted in those particular cases. It was there held that where a question arose how far a pardon would protect an approver, it should number be treated in a narrow spirit, bearing in mind that in companyntenancing tender of pardons to accomplices the law does number invite a cramped and companystrained statement by the approver but requires a thorough and companyplete disclosure of all the facts within his knowledge bearing upon the offence or offences as to which he gave evidence. The companysiderations which apply when a trial is taking place under s. 339 of the Code of Criminal Procedure are entirely different. The proviso to s. 339 shows that at his trial, an approver is entitled to plead that he has companyplied with the companyditions upon which tender of pardon was made and if he succeeds in proving that he has companyplied with the companyditions upon which the tender was made he is protected from prosecution with respect to all offences which appear to have been companymitted in companynection with the matter giving rise to the offence for which pardon was tendered. These three cases really turn on the question whether the accused had companyplied with the companyditions upon which the pardon was tendered to him and it was held that he had so companyplied. In those circumstances, the trial under s. 339 was held to be bad. We are number companycerned in the present case with s. 339. What we have to decide is whether a pardon under s. 337 1 of companye of Criminal Procedure can be granted in the case of an offence under s. 5 of the Official Secrets Act read with s. 120-B of the Indian Penal Code. To that there can be only one answer on the terms of s. 337 1 , namely, that numberpardon can be granted for an offence of this nature. Therefore, as the present proceedings before the magistrate are only for an offence under s. 5 of the Official Secrets Act read with s. 120-B of the Indian Penal Code, Mehra cannot be examined as an approver in that companyrt.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 141 of 1958. Appeal by special leave from the judgment and order dated November 28, 1957, of the Madhya Pradesh High Court in Criminal Revision No. 78 of 1957, arising out of the judgment and order dated August 21, 1957, of the Court of Special Judge at Gwalior in File No. 2/57 Special Case. C. Mathur and R. H. Dhebar, for the appellant. The respondent did number appear. 1959. February 3. The Judgment of the Court was delivered by SUBBA RAO, J.-This is an appeal by special leave against the, Judgment of the High Court of Madhya Pradesh at Jabalpur directing the Special Judge, Indore, to order the Deputy Superintendent of Police to carry on the investigation afresh. The facts are simple. One Shri Mohinder Nath Bhalla was the manager of Daisy Sewing Machine Co. Ltd., Bhopal. On January 11, 1955, between 12 and 1 p. m., he companytacted the Sub-Inspector of Police, Special Police Establishment, Gwalior, and gave him the following information The companypany had opened their stall in the Gwalior Mela and he Shri Bhalla had to book empty wooden cases of machine and machine parts from Gwalior Mela, to Now Delhi. When lie went to the station to enquire for booking the said cases, the Station Master demanded annas ten for each case as illegal gratification, but he did number agree to it. Subsequently, the Assistant Station Master agreed to accept annas eight for each case and asked him to bring the wooden cases between 2 and 4 p. m. on the same day, i.e., January 11, 1955. On this allegation lie requested the police to take action to stop the said sort of companyruption . The police officer went along with the informant to his stall at Gwalior Mela and saw the twenty wooden cases-twelve big and eight small-ready for booking. The said Shri Bhalla gave the police officer a typed companyplaint signed by him and duly attested by two witnesses. With the assistance of the police officer, a trap was laid. The numbers of the rupee numberes intended to be given as bribe to the Assistant Station Master were entered in a memorandum which was attested by witnesses. The said rupee numberes were given to Shri Bhalla in the presence of the witnesses. Shri Bhalla was instructed to pay the amount to the Assistant Station Master when demanded by him in such a manner that the witnesses companyld overhear the companyversation and also see the Assistant Station Master taking the bribe. He was also told that on his giving a signal, the police would companye on the scene. The plan was carried out in detail as agreed. The Assistant Station Master, after some bargaining, took the bribe, and after the act of bribery was companypleted, Shri Bhalla gave the prearranged signal. The Sub-Inspector then went to the Station Office and disclosed his identity to the Assistant Station Master in the presence of witnesses and asked him to produce the money taken by him as bribe. The Assistant Station Master, when questioned by the Sub- Inspector, gave him his name and also produced the numberes which he had kept in his pocket. The police officer took those numberes and companynted them. The numbers on those numberes tallied with those numbered in the memorandum. He then searched the person of the Assistant Station Master and secured the articles found on him. He also searched the person of Shri Bhalla and took from his shirt two currency numberes, which he did number give to the Assistant Station Master, as the bargain was struck at a smaller amount, and secured the same. The numbers of those numberes also tallied with the companyresponding numbers numbered in the memorandum. Thereafter, a memorandum of the articles recovered was prepared in the presence of the witnesses and was duly attested by them. The forwarding numbere, together with the record companyy of the R R prepared in respect of the booking of the twenty wooden cases to New Delhi, was taken possession of and another memorandum was prepared in regard to them. An inventory of the twenty wooden cases lying on the platform near the weighing machine as booked by the Assistant Station Master was also prepared and the same was attested by the witnesses. The Sub-Inspector, having regard to the aforesaid facts, came to the companyclusion that the facts disclosed offences punishable under ss. 120-B and 161 of the Indian Penal Code and s. 5 2 of the Prevention of Corruption Act, 1947 2 of 1947 , had been companymitted by the Assistant Station Master, Shri Mubarak Ali, and the pointsman, Shri Mool Chand, of Golakamandir railway station. On the same day he sent a report of the aforesaid facts to the Special Police Establishment Office, Madhya Bharat. The office registered it on January 14, 1955, in its register. Seven days thereafter, on January 21, 1955, the Sub- Inspector filed an application before the Additional District Magistrate Judicial , Gwalior, asking for permission to investigate the offence under the aforesaid sections. The record does number disclose what further steps were taken by the Sub-Inspector after he obtained the said permission from the Additional District Magistrate. On October 1, 1955, a charge-sheet was filed before the Special Judge, Anti-Corruption, Indore. It appears from the record that soon after the case was taken up for trial, the respondent filed objections questioning, inter alia, the validity of the order of the Additional District Magistrate giving permission to the Sub-Inspector to make the investigation. But the scope of the objections is number clear as they have number been placed before us. It appears that the Special Judge intended to take evidence on the question of delegation of power of investigation, but the prosecution applied for adjournment on the ground that an appeal had been filed in the High Court against a similar order directing the prosecution to give evidence on the said question and the same was pending there. The learned Special Judge, though inclined number to give the adjournment, made an order giving an adjournment of three weeks on December 3, 1955, on the ground that the Special Police Establishment Office might number have any grievance on that account . We do number know what transpired between December 3, 1955, and the date of disposal of the objections by the Special Judge, i. e., August 21, 1957. On August 21, 1957, the learned Special Judge made an order discharging Shri Mool Chand, the pointsman, and charging Shri Mubarak Ali, the Assistant Station Master, under s. 161 of the Indian Penal Code. By the said order the learned Judge, presumably an officer different from the one who gave the adjournment in 1955, disallowed the objection of the accused on the ground that on the date when the Magistrate gave the sanction, there were many papers in companynection with a case against the accused, on observing which the Magi- strate companyld have satisfied himself whether-there was a prima facie case or number against the accused and that there was numberreason to believe that at the time of giving the sanction, the Magistrate did number peruse the papers. The accused preferred a Revision against the said order to the High Court of Madhya Pradesh. The High Court came to the companyclusion that the Sub-Inspector applied for permission ten days after investigation had started and that the Magistrate did number satisfy himself that there were good and sufficient reasons for authorising the officer of a lower- rank to companyduct the investigation but had given the permission as a mere matter of routine. In the result, the High Court set aside the order of the Special Judge with a direction that in order to rectify the defects and cure the illegality he should order the Deputy Superintendent of Police to carry on the investigation himself while the case remains pending on his file . The State, preferred the present appeal against the said order of the High Court. Learned Counsel, appearing for the State, raised before us two points i the High Court was number justified in holding that the Magistrate gave the permission as a mere matter of routine without satisfying himself as to the advisability of giving such permission ii the High Court was wrong in holding that the investigation started ten days prior to the obtaining of permission of the Magistrate by the Sub- Inspector. To appreciate the first companytention, it is necessary to set out some of the relevant provisions of The Prevention of Corruption Act, 1947 2 of 1947 , hereinafter referred to as the Act. Section 3 as it stood before the Prevention of Corruption Amendment Act, 1955 50 of 1955 An offence punishable under section 161 or section 165 or section 165A of the Indian Penal Code Act 45 of 1860 shall be deemed to be a companynizable offence for the purposes of the Code of Criminal Procedure, 1898 Act 5 of 1898 , numberwithstanding anything to the companytrary companytained therein Section 4. 1 Where in any trial of an offence punishable under section 161 or section 165 of the Indian Penal Code Act 45 of 1860 , it is proved that an accused person has accepted or obtained, or has agreed to accept or attempted to obtain, for himself or for any other person, any gratification other than legal remuneration or any valuable thing from any person, it shall be presumed unless the companytrary is proved that he accepted or obtained, or agreed to accept or attempted to obtain, that gratification or that valuable thing, as the case may be, as a motive or reward such as is mentioned in the said section 161, or, as the case may be, without companysideration or for a companysideration which he knows to be inadequate . The Act was passed, as the preamble indicates, to make more effective provisions for the prevention of bribery and companyruption among public servants. It introduced a definition of the offence of criminal misconduct in discharging an official duty and new rules of presumption against accused in the case of the said offence. But in the year 1952, by Act 59 of 1952, presumably on the basis of the experience gained, s. 5A was inserted in the Act to protect the public servants against harassment and victimization. If it was in the interest of the public that companyruption should be eradicated, it was equally in the interest of the public that honest public servants should be able to discharge their duties free from false, frivolous and malicious accusations. To achieve this object, ss. 5A and 6 introduced the following two safeguards 1 numberpolice officer below the rank- a in the presidency towns of Madras and Calcutta, of an assistant companymissioner of police, b in the presidency town of Bombay, of a superintendent of police and c elsewhere, of a deputy superintendent of police, shall investigate any offence punishable under s. 161, s. 165 or s. 165A of the Indian Penal Code or under sub-s. 2 of s. 5 of the Act, without the order of a presidency magistrate or a magistrate of the first class, as the case may be, or make any arrest therefor without a warrant-see s. 5A 2 numbercourt shall take companynizance of an offence punishable under s. 161 or s. 164 or s. 165 of the Indian Penal Code or under s. 5 2 of the Act, alleged to have been companymitted by a public servant, except with the previous sanction, of the appropriate Government-see s. 6. These statutory safeguards must be strictly companyplied with, for they were companyceived in public interests and were provided as a against frivolous and vexatious prosecutions. While in the case of an officer of assured status and rank, the legislature was prepared to believe them implicitly, it prescribed an additional guarantee in the case of police officers below that rank, namely, the previous order of a presidency magistrate or a magistrate of the first class, as the case may be. The magistrates status gives assurance to the bonafide8 of the investigation. In such circumstances, it is self-evident that a magistrate cannot surrender his discretion to a police officer, but must exercise it having regard to the relevant material made available to him at that stage. He must also be satisfied that there is sufficient reason, owing to the exigencies of administrative companyvenience, to entrust a subordinate officer with the investigation. This Court in H. N. Rishbud and Inder Singh v. The State of Delhi 1 emphasised the necessity to adhere strictly to the provisions of s. 5A of the Act. Jagannadhadas, J., who delivered the judgment of the Court, observed at p. 1159 1 1955 1 S.C.R. 1150. When, therefore, the Legislature thought fit to remove the protection from the public servants, in so far as it relates to the investigation of the offences of companyruption companyprised in the Act, by making them companynisable, it may be presumed that it was companysidered necessary to provide a substituted safeguard from undue harassment by requiring that the investigation is to be companyducted numbermally by a police officer of a designated high rank. Having regard therefore to the peremptory language of subsection 4 of section 5 of the Act as well as to the policy apparently underlying it, it is reasonably clear that the said provision must be taken to be mandatory . After adverting to the argument advanced on behalf of the State,learned Judge closed the discussion thus at p. 1162 We are, therefore clear in our opinion that section 5 4 and provisoto section 3 of the Act and the companyresponding section 5-A of Act LIX of 1952 are mandatory and number directory and that the investigation companyducted inviolation thereof bears the stamp of illegality. This Court again companysidered the scope of s. 6 of the Act in Biswabhusan Naik v. The State of Orissa 1 . One of the questions raised there was that the sanction given by the Government was invalid. In rejecting that companytention Bose, J., observed at p. 95 The judgment of the Judicial Committee relates to clause 23 of the Cotton Cloth and Yarn Control Order, 1943, but the principles apply here. It is numbermore necessary for the sanction under the Prevention of Corruption Act to be in any particular form, or in writing or for it to set out the facts in respect of which it is given than it was under clause 23 of the Order which their Lordships were companysidering. The desirability of such a companyrse is obvious because when the facts are number set out in the sanction proof has to be given aliunde that sanction was given in respect of the facts companystituting the offence charged, but an 1 1955 1 S.C.R. 92. omission to do so is number fatal so long as the facts can be, and are provided in some other way . While the former decision emphasises the importance of the protection given by the Act to public servants against harassment, the latter decision points out the desirability of giving all the necessary facts in an order giving sanction-the same applies to an order of a Magistrate-and also the necessity of proof aliunde of the said facts in case the facts are number disclosed in the sanction. Applying the said two principles, we must hold that in a case where an officer other than the designated officer, seeks to make an investigation, he should get, the order of a Magistrate empowering him to do so before he proceeds to investigate and it is desirable that the order giving the permission should ordinarily, on the face of it, disclose the reasons for giving the permission. For one reason or other, if the said salutary practice is number adopted in a particular case, it is the duty of the prosecution to establish, if that fact is denied, that the Magistrate in fact has taken into companysideration the relevant circumstances before granting the permission to a subordinate police officer to investigate the case. In the present case, though objection was taken by the accused at the earliest stage in 1955 on the ground that the order giving permission was invalid numberattempt was made by the prosecution, though years have elapsed between the date of the petition and that of the order of the Sessions Judge, to adduce any evidence to support the companytention that the Magistrate gave the permission to the Sub-Inspector only after satisfying himself on the advisability of doing so on the material placed before him. The only material that was placed before the Sessions Judge was the application filed by the Sub-Inspector before the Magistrate seeking the said permission and the order made by him thereon. In that application the Sub-Inspector stated that he had been deputed to investigate the case and therefore permission might be given to him to do so under s. 5-A of the Act. On that application, the Magistrate passed the order permission given . Neither the application number the order made thereon discloses that any material was placed before the Magistrate on the basis of which he gave the permission. Ex facie, it appears to us, just like it appeared to the High Court, that the Magistrate did number realise the significance of his order giving permission, but only mechanically issued the order on the basis of the application which did number disclose any reason, presumably because he thought that what was required was only a formal companypliance with the provisions of the section. A request was made before the High Court that an opportunity should be given to the prosecution to enable them to produce the necessary evidence to support the order of the Magistrate. But the learned Judge of the High Court rightly did number accede to that belated request. We, therefore, without any hesitation, agree with the High Court that the provisions of s. 5A of the Act have number been strictly companyplied with in this case. In this view numberother question arises for companysideration. But as the learned Counsel appearing for the State companytended that the observations of the learned Judge of the High Court that permission of the Magistrate was obtained ten days after the investigation was started was wrong, it would be as well that we companysidered the argument briefly. Section 4 1 of the Code of Criminal Procedure defines investigation as to include all the proceedings under that Code for the companylection of evidence companyducted by the police officer or other persons other than a Magistrate who is authorised by the Magistrate in this behalf. Chapter XIV of the Code prescribes the procedure for investigation. Investigation starts after the police officer receives information in regard to an offence. Under the Code investigation companysists generally of the following steps i proceeding to the spot ii ascertainment of the facts and circumstances of the case iii discovery and arrest of the suspected offender iv companylection of evidence relating to the companymission of the offence which may companysist of a the examination of various persons including the accused and the reduction of their statements into writing, if the officer thinks fit, b the search of places of seizure of things companysidered necessary for the investigation and to be produced at the trial and v formation of the opinion as to whether on the material companylected there is a case to place the accused before a Magistrate for trial and if so taking the necessary steps for the same by the filing of a charge-sheet under s. 173.See H. N. Rishbud and Inder Singh The State of Delhi 1 . From the narration of facts given supra, it would be seen that in the present case Shri Bhalla gave information to the Sub-Inspector on January 11, 1955, as regards the attempt by the Station Master as well as the Assistant Station Master to take bribe from him. Under s. 5 of the Act, attempt to obtain from any person for himself or for any other person any gratification is in itself an offence and therefore the information certainly related to an offence. Thereafter, the Sub-Inspector, after assisting Shri Bhalla to trap the accused, came on the scene, questioned the accused, searched his person and recovered the marked numberes and other articles from him he searched the person of the informant and recovered the other numberes marked but number given to the accused he took possession of the twenty wooden boxes intended to be booked and the forwarding numbere together with the record companyy of the R R he got prepared relevant memoranda for the aforesaid recoveries and got them duly attested by witnesses and thereafter on the basis of his investigation he sent a report to the Special Police Establishment Office, Indore.

Case appeal was rejected by the Supreme Court

because under the Explanation the goods, in respect of which the companytract of sale is made, must, at the date of the companytract be in existence in the Central Provinces, that is to say, that the goods must at the date of the companytract be there in the form in which they are agreed to be sold and there was numberevidence, in the present case, for this. CIVIL APPELLATE JURISDICTION Civil Appeal No. 13 of 1958. Appeal by special leave from the judgment and order dated June 29, 1954, of the former Nagpur High Court in Misc. Civil Case No. 219 of 1952. Ganapathy Iyer and D. Gupta, for the appellant. C. Setalvad, Attorney-General for India, K. G. Chondke, B. Dadachanji and K. K. Raizada, for the respondents. N. Shroff, for the Intervener State of Madhya Pradesh . 1959. April 21. The Judgment of the Court was delivered by DAS, C. J.-This is an appeal by special leave, against the order of the High Court of Judicature at Nagpur dated June 29, 1954, answering against the appellant certain questions referred to it by the Board of Revenue under s. 23 1 of the Central Provinces Berar Sales Tax Act, 1947 hereinafter referred to as the Act . The reference arose out of an order of assessment made on the respondent for payment of sales tax for the period June 1, 1947, to November 12, 1947, on a taxable turnover of Rs. 30,067-9-0. The facts leading up to the present -appeal may shortly be stated as follows. The respondent deals in matchwood called sawar Bombay- Malabaricum . His place of business is situate at Chanda in the erstwhile Central Provinces. In January 1948 the respondent entered into an agreement with the Western India Match Co. Ltd., which is popularly known and will hereinafter be referred to as WIMCO for the supply of a minimum quantity of 2,500 tons of sawar logs during the season 1947-48. This agreement is evidenced by WIMCOs letter dated January 7, 1948, accepting and companyfirming it. Unfortunately that letter, although a part of the record, has number been printed in the Paper Book. It is companymon ground, however, that the agreement of sale was subject to the companyditions appearing in a formal companytract in writing dated March 2, 1945, which is said to have been renewed from year to year. It appears that prior to the execution of the last mentioned companytract there was another companytract between the respondent and WIMCO which was dated October 18, 1940. Evidently that companytract was superseded by the later one of March 2, 1945, the terms and companyditions whereof were renewed year after year. It is, therefore, number easily intelligible why both the companytracts were filed before the Sales Tax authorities and actually mentioned in the first question that was referred to the Hight Court. Both the companytracts have been printed in the Paper Book and reference has been made to some of the terms of both of them in the companyrse of the arguments before us. The reason for referring to the terms of the ,earlier companytract is presumably to emphasise the variation in the language used in the companyresponding provisions of the later companytract as indicative of a definite change in the intention of the parties. It is, therefore, as well that the relevant clauses of both the companytracts should be set out here for properly following the arguments advanced on both sides. Reference may first be made to the earlier companytract dated October 18, 1940. Clause I sets out the specifications, that is to say, the dimensions and quality of the logs to be delivered under the companytract which need number be reproduced here. The other material clauses, omitting the unnecessary portions thereof, may number be set out- The Contractor agrees that any logs supplied by him which do number companyform with the specification herein shall number be accepted or paid for by the companypany and he the companytractor undertakes to remove all logs so rejected at his own expense from the Companys premises within fifteen days after date of numberice to him or his representative from the Company so to remove such logs. Should the Contractor fail to i.e. move such logs from the Companys premises within the period stipulated it is hereby mutually agreed that such failure shall be companystrued as being the Contractors companysent to relinquish all claims whatsoever to such rejected logs, and the Contractor agrees to such logs thereupon becoming the property of the companypany and that the companytractor shall have numberclaim whatsoever upon the companypany for payment either in respect of the supply by him of such rejected logs or arising out of the disposal by the Company of such logs. The said goods shall be delivered at Ambernath in the quantities and at the times hereinafter mentioned, i.e., The goods to be supplied under this Contract shall be despatched by the Contractor from Railway Stations on the N.R. and G.I.P.R. Sections between the following Stations Measurements-The goods under this companytract shall be measured under the supervision of the Companys Factory Manager at Ambernath on arrival of the goods at the Factory in accordance with the following stipulations- The Contractor agrees to accept the decision of the Companys Factory Manager at Ambernath as final and binding. The prices of the logs to be supplied are set out in cl. 6 of the companytract as F.O.R. Ambernath . We number pass on to the later companytract of March 2, 1945. Clause 1 sets out the specifications of the logs to be supplied under the companytract in exactly the same language as in el. I of the earlier companytract. The other material clauses, again omitting the unnecessary portions, are as follows- The companytractor agrees that any logs supplied by him which, on arrival at Ambernath, are found in the opinion of the Companys Factory Manager number to companyform with the specifications herein shall number be accepted or paid for by the Company, numberwithstanding the fact that such logs may have been accepted by the Companys representatives before being railed to Ambernath. It may be mentioned here that Ambernath is a place situate in the erstwhile province of Bombay and outside the Central Provinces. The goods to be supplied under this companytract shall be despatched by the Contractor from railway stations on the B. Railway, N. S. Railway and G. 1. P. Railway sections between the following stations. It is unnecessary to set out the names of the stations which, it may, however, be stated, are all in the erstwhile Central Provinces. Clause 6 provides Measurements- The goods under this companytract shall be measured under the supervision of the Companys representative in accordance with the following stipulations- The companytractor agrees to accept the decision of the Companys Factory Manager at Ambernath as final and binding. The prices of the logs to be supplied under the companytract are specified as F.O.R. Ambernath in cl. 7 which companycludes with the following sentence The money so due and payable shall be paid by the Company to the Contractor when the measurements of the goods have been companypleted under the supervision of the Companys representative. Pursuant to the agreement between the respondent and WIMCO, the former loaded diverse quantities of Sawar logs on railway wagons and despatched the same by railway from Chanda or other railway stations in the Central Provinces to Ambernath in the erstwhile province of Bombay and outside the Central Provinces. It is number disputed that on many occasions the representative of WIMCO was present at the railway station when the logs were sorted out and loaded into the wagons. The statement of the case submitted along with the reference under s. 23 1 of the Act is silent on the point as to whether the railway receipts were made out with WIMCO as the companysignee but it is abundantly clear from the order of the Assistant Commissioner, Sales Tax, which is part of the record -and it has number been disputed before us- that the railway receipt which is a document of title according to s. 2 4 of the Indian Sale of Goods Act is taken in the name of the companysignee. The companyrse of dealings between the parties also appears to be that, on arrival of the logs at Ambernath, the companysignee buyer WIMCO, paid the railway freight and the logs were inspected and measured by WIMCOs Factory Manager and the prices, calculated at the agreed rates, were paid to the respondents agent at Bombay. There is numberdoubt that the price of the logs supplied by the respondent to WIMCO under the agreement and accepted by the latter during the period in question amounted to Rs. 30,067- 9-0. The question for our decision is whether the respondent is liable to pay any sales tax under the Act. It will be companyvenient at this stage to refer to the relevant provisions of law applicable to the facts of this case. Section 4 of that Act is the charging section. According to this section safes tax is payable on all sales effected after the companymencement of the Act. Sale is defined by s. 2 g of the Act. At the relevant period, that section, omitting Explanation 1, which is number material for our purpose, ran as follows- Sale with all its grammatical variations and companynate expressions means any transfer of property in goods for cash or deferred payment or other valuable companysideration, including a transfer of property in goods made in companyrse of the execution of a companytract, but does number include a mortgage, hypothecation, charge or pledge. Explanation II-Notwithstanding anything to the companytrary in the Indian Sale of Goods Act, 1930, the sale of any goods which are actually in the Central Provinces and Berar at the time when the companytract of sale as defined in that Act in respect thereof is made, shall, wherever the-said companytract of sale is made, be deemed for the purpose of this Act to have taken place in the Central Provinces and Berar. The Act being a piece of legislation enacted by the legislature of the erstwhile Province of Central Provinces and Berar, its operation is limited to the territories of that province. Therefore, the question arises Does the sum of Rs. 30,067-9-0 represent the prices of logs sold by the respondent within the Central Provinces ? Sale being the transfer of property in the goods agreed to be sold, we have to enquire if the property in the goods which fetched the sale proceeds on which the sales tax is sought to be levied was transferred in the Central Provinces as companytemplated in the main definition or if those goods were actually in the Central Provinces at the time when the companytract for sale as defined in the Sale of Goods Act in respect thereof was made as required by Explanation II set out above. This takes us to the Sale of Goods Act, 1930. Section 4 of the Sale of Goods Act is expressed in the words following- Sale and agreement to sell- I A companytract of sale of goods is a companytract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a companytract of sale between one part-owner and another. A companytract of sale may be absolute or companyditional. Where under a companytract of sale the property in the goods is transferred from the seller to the buyer, the companytract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some companydition thereafter to be fulfilled, the companytract is called an agreement to sell. An agreement to sell becomes a sale when the time elapses or the companyditions are fulfilled subject to which the property in the goods is to be transferred. There can be numberdoubt that the agreement pursuant to which the logs were supplied by the respondent to WIMCO was an agreement to sell within the meaning of the above section. There is also numbercontroversy between the parties that at the date when this agreement was entered into, the logs were unascertained goods. The question is When did that agreement to sell unascertained goods become a sale and where did such sale take place ? In other words, when and where did the property in those goods pass from the respondent to WIMCO ? The transfer of property in the goods as between the seller and buyer is dealt with in Ch. III of the Sale of Goods Act. Section 18 of the Sale of Goods Act runs thus Goods must be ascertained-Where there is a companytract for the sale of unascertained goods, numberproperty in the goods is transferred to the buyer unless and until the goods are ascertained. Passing over ss. 19 to 22 which except as to sub-s. 3 of s. 19 apparently apply to companytracts for the sale of specific or ascertained goods, we companye to s. 23 which provides - Sale of unascertained goods and appropriation - I Where there is a companytract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the companytract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be expressed or implied, and may be given either before or after the appropriation is made. Delivery to carrier-Where, in pursuance of the companytract, the seller delivers the goods to the buyer or to a carrier or other bailee whether named by the buyer or number for the purpose of transmission to the buyer, and does number reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the companytract. Reference may next be made to s. 33 and s. 39 1 . Section 33 says- Delivery -Delivery of goods sold may be made by doing anything which the parties agreed shall be treated as delivery or which has the effect of putting the goods in the possession of the buyer or of any person authorised to hold them on his behalf Section 39 1 runs as follows- Delivery to carrier or wharfinger- Where, in pursuance of a companytract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or number, for the purpose of transmission to the buyer, or delivery of the goods to wharfinger, for safe custody, is prima facie deemed to be delivery of the goods to the buyer. Keeping the provisions of the above quoted sections of the two Acts in view, we have to decide when and where the property in the logs passed from the respondent to WIMCO. The Assistant Commissioner of Sales Tax assessed the respondent to -a tax of Rs. 939-10-0 and imposed on the respondent a penalty of Rs. 100 under s. 25 of the Act for number having submitted its return in companytravention of r. 19 of the Central Provinces and Berar Sales Tax Rules. The Assistant Commissioner took the view that the loading of the logs into the wagons at railway stations within the Central Provinces and the taking out of the railway receipts in the name of the companysignee, WIMCO, and the delivery of the same to WIMCO, had the effect of putting the latter in pos- session of the goods as laid down in s. 39 1 of the Indian Sale of Goods Act and he accordingly held that the sale of the goods took place at Chanda and other railway stations in the Central Provinces and that the assessee was, companysequently, liable to pay the sales tax under the Act. The respondent preferred an appeal to the Sales Tax Commissioner who upheld the Assistant Commissioners order of assessment as well as of the penalty. He laid greater emphasis on Explanation II to s. 2 g of the Act as over- riding the provisions of the Indian Sale of Goods Act in respect of the transfer of property in the logs and held that as the logs were in the Central Provinces at the date when the companytract for sale was made, the transfer in them must be deemed to have taken place there under that Explanation. He also agreed with the Assistant Commissioner that the delivery of the logs to the railway companypany and the sending of the documents of title to WIMCO had, under s. 39 1 of the Sale of Goods Act, the effect of putting WIMCO in possession of the logs. The respondent preferred what in form appeared to be a second appeal to the Board of Revenue. As, however, there companyld be numbersecond appeal under s. 22 4 of the Act, the Board treated the memorandum of appeal as an application for revision under sub-s. 5 of s. 22 of the Act read with r. 57. Both the members of the, Board of Revenue came to the same companyclusion, namely, that the sales were liable to assessment under the Act, but the reasonings adopted by them were somewhat different. Shri Shrivastava, a member of the Board of Revenue, took the view that as soon as logs answering the description agreed upon were brought to the railhead at Chanda and sorted out and loaded in the wagons in the presence of WIMCOs re- presentatives, there was an implied companytract of sale of specific and ascertained goods, as evidenced by the companyduct of parties and the property in each companysignment passed immediately from the respondent to WIMCO at the railway station in the Central Provinces where such implied companytracts were made. The Chairman of the Board of Revenue, however, took the view that the companytract of sale was made outside the Central Provinces, namely, in Bombay and that, under the Sale of Goods Act, the property in the logs passed to WIMCO in Ambernath outside the province but that as the logs were in the Central Provinces, either in the form of logs or in the form immediately preceding, namely, trees standing on the land which had been impliedly agreed to be severed from the land before actual sale, Explanation II to s. 2 g of the Act applied and the sale must, accordingly, -be deemed to have taken place within the Central Provinces and, must, therefore, be liable to sales tax under the Act. The Board rejected the application but remitted the penalty. On the application of the respondent under s. 23 1 of the Act, the Board of Revenue submitted to the High Court a statement of case raising the following questions- Did the agreements of the kind on record the one dated 18-10-40 and the other dated 2-3-45constitute companytracts of sale-either express or implied -in respect of sawar wood supplied by the assessee to WIMCO? If the answer to question No. I be in the affirmative, did the companytracts relate to specific or ascertained goods or to unascertained or future goods? Did the property in the goods pass to WIMCO by companysignment simpliciter at different railway stations within this province, or did it pass at Ambernath when the goods were approved as provided in the companytract ? Was reliance on the definition of I goods companytained in s. 2 7 of the Sale of Goods Act in order in applying Explanation II to s. 2 g of the Sales Tax Act in cases, where the goods sold were in the form of trees standing on the land in this province at the time of the companytract of sale? In its judgment dated June 29, 1954, the High Court took the view that the sales in question did number take place in the Central Provinces and Berar and companysequently were number sales within the meaning of the Act and, therefore, number liable to tax. It gave the following answers to the above questions- Our answers to the questions referred for decision are - The agreement in question was an express agreement to sell sawar logs to WIMCO. There was neither an express number an implied companytract each time goods were railed. The-contract was number for delivery of specific goods but of unascertained or future goods by description. The property in the goods did number pass to the buyer by the delivery to the railway for carriage. It passed at Ambernath where the goods were appropriated by the buyer to the companytract with the assent of the seller. The word goods in the definition of I sale in the Sales Tax Act must be interpreted according to its definition in s. 2 d of the Act and number according to the definition in s. 2 7 of the Sale of Goods Act. The standing sawar trees are number goods within the meaning of the former Act. The effect of the answers being to nullify the assessment order, the Commissioner of Sales Tax has companye up on appeal before us after obtaining special leave of this Court. The answers to the first two questions have number been questioned before us. The main arguments have centred round the answers to questions 3 and 4. The answer to question 3 turned on the companystruction placed by the High Court on s. 23 of the Sale of Goods Act. After quoting s. 23, the High Court observed as follows- After sorting the logs with the assent of the buyers representative, the applicant appropriated the logs to the companytract by railing them to the buyers destination at Ambernath. The statement of the case is silent on the point whether the railway receipts were made out with the Company as the companysignee. The assent of the representative was provisional and was number binding on the Company. Under the agreement it did number agree to unconditionally appropriate the logs to the companytract as soon as they were delivered to the railway with the assent of its representative for carriage to Ambernath. It had expressly reserved its right to reject the goods on examination at Ambernath. The agreement therefore was that the buyer should, with the assent of the seller, appropriate the goods to the companytract at Ambernath. The appropriation under s. 23 was number companyplete till the goods reached Ambernath and were appropriated by the Company to the companytract. The appropriation of the goods by the applicant at the railheads was companyditional on their acceptance by the buyer at Ambernath. There is numberhing in the statement of the case to show that the logs were number so appropriated. Therefore, the property in the logs passed to the buyer at Amber nath. The learned companynsel for the department appearing in support of this appeal companytends that property in the logs passed from the respondents to WIMCO under s. 23 when sawar logs were brought to the railway station and loaded in the wagon and the railway receipts taken in the name of WIMCO were forwarded to the latter. There was an unconditional appropriation of the goods to the companytract by the respondent. There was, according to learned companynsel, assent on the part of WIMCO to this appropriation in two ways, namely, a expressly given by its representative who was present at the railway station, and b impliedly given by WIMCO by having agreed in advance that the goods should be despatched by rail from the stations mentioned in cl. 4 of the agreement, all of which were situate in the Central Provinces. There is numberdoubt-and indeed it has been categorically companyceded by learned companynsel for the department -that the companytract was for sale of unascertained goods and companysequently the property in them companyld number, under s. 18, pass unless and until the goods were ascertained. His companytention is that logs of the companytract quality and description having been unconditionally appropriated by the respondent to the companytract without reserving to itself any right of disposal and WIMCO having expressly through its representative or impliedly by the very terms of the companytract assented to such appropriation, property in them passed under s. 23 from the respondent to WIMCO at the railway stations within the Central Provinces as soon as the sawar logs were loaded on the wagons and the railway receipts were taken out in the name of WIMCO. It is said that so far as the respondent is companycerned it unconditionally appropriated the logs to the companytract. Seeing that they were actually accepted by WIMCO on their arrival at Ambernath it is quite clear that the logs were of the companytract quality and description. The only question, according to learned companynsel for the department therefore, is whether there was assent of WIMCO to such appropriation. It has been found as a fact that WIMCOs representative was number present on all occasions when sawar logs used to be loaded on the railway wagons. There is numberevidence that he was actually present when these particular sawar logs, with the sale proceeds of which we are companycerned, were put into the wagons. Nor is there an iota of evidence that the representative of WIMCO had any authority to. bind WIMCO by any assent. In view of these difficulties, learned companynsel for the department did number press the case of express assent of the representative of WIMCO and companycentrated on the case of implied assent. It is quite clear from the language of s. 23 itself, that the appropriation may be by the seller with the assent of the buyer or by the buyer with the assent of the seller, that assent to representation may be express or implied and that it may be given after the appropriation or in advance before such appropriation. Learned companynsel for the department lays strong emphasis on the provision of cl. 4 in the companytract that the sawar logs should be despatched by rail from certain stations within the Central Provinces and companytends that delivery by the seller of sawar logs of the companytract quality and description to the railways in terms of the companytract without the reservation of any right of disposal has the effect of passing the property therein to WIMCO at the railway stations in the Central Provinces under s. 23 as well as of companystituting delivery of them at the railway stations under ss. 33 and 39 1 . The argument is prima facie sound unless there be some other provision in the companytract to negative this companyclusion, e. g., that the logs must be carried to Ambernath and delivered there See The Badische Anilin and Soda Fabrik v. The Basle Chemical Works, Bindschedler 1 . Learned companynsel for the department does number urge that if the matter had to be decided on the terms of the earlier companytract dated October 18, 1940, he companyld properly say that there was numberhing in the companytract negativing the idea of the passing of property in the logs within the Central Provinces. The cumulative effect of the provisions of el. 2 that the property in the rejected logs would pass to WIMCO upon the failure of the respondent to remove the same after rejection, of el. 3 that the goods shall be delivered at Ambernath in the presence of WIMCOs Factory Manager and of el. 6 providing that the prices will be F.O.R. Ambernath clearly militate against the theory of passing of property immediately on the goods being loaded into the wagons. While number companytesting this, learned companynsel for the department urges that there is numbersuch companytrary intention indicated in the later companytract of March 2, 1945, which really governs the case. We are unable-to accept this distinction as of any substance. It is true that in this later companytract cl. 2 is differently worded and there is numberexpress provision that the goods should be delivered at Ambernath. There are, nevertheless, several other provisions in the later companytract indicating that property in the logs loaded in the wagon will number pass to WIMCO until after the goods arrive at Ambernath and are inspected, measured and accepted by WIMCOs Factory Manager. Clause 2 of the later companytract quite clearly reserves the right of WIMCO to examine the goods on arrival and to reject the same if they are found, in the opinion of its Factory Manager, number to 1 1898 A.C. 200, companyform with the specifications. This reservation, which is made numberwithstanding the fact that the logs may have been accepted by its representative before they were railed to Ambernath, clearly indicates that the so called acceptance by the representative was number final but was entirely tentative and subject to approval of the logs by WIMCOs Factory Manager at Ambernath after their arrival. This circumstance certainly militates against the property in them having already passed to WIMCO at the railway stations in the Central Provinces. The provisions of cl. 6 that the goods shall be measured under the supervision of WIMCOs representative, the decision of its Factory Manager at Ambernath being binding on the respondent and of el. 7 that the prices shall be F.O.R. Ambernath and shall be payable after such measurement of the logs by WIMCOs representative further reinforce the companyclusion that the intention of the parties was that property in the goods shall number pass until the logs arrive at Ambernath and are there inspected, measured and accepted by WIMCO. In our judgment the prima facie case of what might have been the appropriation of the logs by the respondent by loading on the wagons logs of the companytract quality and description with the assent of WIMCO given in .advance by the terms of el. 4 is effectively displaced by the provisions of cls. 2, 6 and 7 of the later companytract which clearly indicate a companytrary intention. On a proper companystruction of the companytract as a whole the intention of the parties clearly was that the respondent would send the logs by rail from the different stations in the Central Provinces to Ambernath where WIMCOs Factory Manager would inspect, measure and accept the same if in his opinion they were of the description and quality agreed upon. In other words the respondent sent the logs and left it to WIMCO to appropriate to the companytract such of them as they accepted as of companytract quality and description. The respondent, therefore, gave in advance its assent to WIMCOs appropriation of the goods at Ambernath. Therefore, the decision of the High Court cannot be assailed but must be accepted as well-founded in fact and in law. Learned companynsel for the department then falls back upon the Argument founded on Explanation- II to s. 2 g and argues, somewhat halfheartedly, that numberwithstanding the provisions of the Sale of Goods Act regarding the passing of property in the goods the sale under companysideration must be deemed, in the light of that Explanation, to have taken place within the Central Provinces. The question of the companystitutional validity of that Explanation was number raised in the High Court and indeed, in view of the decision of this Court in Poppatlal Shah v. State of Madras 1 and other cases, cannot number be raised and we must proceed on the footing that Explanation 11 did number transgress the legislative companypetency of the Legislature which enacted the same. It will be numbericed that Explanation II can apply only if the goods in respect of which the companytract of sale is entered into are, at the date of such companytract, actually in the Central Provinces. Learned companynsel for the department urges that the logs delivered must have been in existence in the Central Provinces either in the shape of logs or in the shape of standing timber. There is numberevidence that at the date when the agreement for sale was made, the particular logs delivered thereunder were in the Central Provinces in the shape of logs at all. Learned companynsel says that, at any rate, they must have been in existence there in the shape of standing timber. Apart from anything else,, the agreement here was riot in respect of any standing timber and there was numberprovision in the agreement as between the respondent and WIMCO for severance of the standing timber before sale under that agreement. In order to attract Explanation II the goods, in respect of which the companytract of sale is made, must, at the date of the companytract be in existence in the Central Provinces, that is to say, that the goods must at the date of the companytract be there in the form in which they are agreed to be sold.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION CRIMINAL Appeal No. 95 of 1957. Appeal by special leave from the judgment and order dated December 16, 1955, of the Allahabad High Court in Criminal Revision No. 1403 of 1953, arising out of the Judgment and order dated August 6, 1953, of the Court of the Additional Sessions Judge at Meerut in Criminal Appeal No. 225 of 1953. J. Umrigar and K. L. Mehta, for the appellant. C. Mathur, C. P. Lal and G. N. Dikshit, for the respondent. 1959. April 23. The Judgment of-the Court was delivered by IMAM, J.-The appellant was companyvicted under s. 5 2 of the Prevention of Corruption Act and under s. 161 of the Indian Penal Code and sentenced to one years rigorous imprisonment on each companynt. The sentences were made to run companycurrently. On the facts found by the companyrts below the appellant accepted Rs. 20/- as illegal gratification from one Malekchand who had applied for allotment of a house. The appellant was employed at that time as a clerk in the office of the District Relief and Rehabilitation Office, Meerut. The aforesaid sum of money was accepted by the appellant as bribe with a view to getting a house allotted to Malekchand. There can be numberquestion that, on the facts found, the appellant was guilty both under s. 5 2 of the Prevention of Corruption Act and under s. 161 of the Indian Penal Code. The first point taken was that the investigation had taken place by a police officer below the rank of Deputy Superintendent of Police. Consequently, the investigation had taken place in companytravention of the provisions of the Prevention of Corruption Act. The companyviction of the appellant was therefore vitiated. This point was taken before the Additional Sessions Judge who had heard the appeal of the appellant against his companyviction. The Additional Sessions Judge referred to a decision of the Calcutta High Court which supported the submission made on behalf of the appellant. He also referred to a decision of the Allahabad High Court to the companytrary effect. He followed, as he was bound to follow, the decision of the Allahabad High Court. The decision of this Court in the case of H. N. Rishbud and Inder Singh v. The State of Delhi 1 does number support the submission made by Mr. Umrigar on behalf of the appellant. He, however, referred to a passage in the aforesaid cited decision at page 1164 to the effect that where a breach of a mandatory provision is brought to the knowledge of the companyrt at a sufficiently early stage, the companyrt, while number declining companynizance, would have to take the necessary steps to get the illegality cured and the defect rectified by ordering such investigation as the circumstances of the case may call for. It has number been shown to our satisfaction that the attention of the trial companyrt was drawn at an early stage to any breach of the provisions of the Prevention of Corruption Act. There had been an enquiry before companymitment to the Sessions. It is clear that during these proceedings before companymitment numberobjection was raised that the investigation had taken place by a police officer below the rank of Deputy Superintendent of Police in companytravention of the provisions of the Prevention of Corruption Act. The decision of this Court was given on December 14, 1954, and the High Court judgment in the present case was delivered on 1 1955 1 S.C.R. 1150, 1164. December 16, 1955. No point was taken before the High Court to the effect that the investigation had been made by an officer below the rank of Deputy Superintendent of Police in companytravention of the provisions of the Prevention of Corruption Act. Such an objection should have been taken if the appellant was prepared to establish before the High Court that the objection had been taken at a sufficiently early stage and that in view of the decision of this Court in the case cited the trial companyrt ought number have proceeded with the trial unless the defect had been removed. The decision of this Court in the case cited is clear, however, that generally a companyviction is number vitiated because there had number been strict companypliance with the provisions of the Prevention of Corruption Act in the matter of investigation by a police officer. As to whether the objection was taken at a sufficiently early stage is a question of fact and ought to have been raised in the High Court as the decision of this Court in the case cited had been delivered something like a year before. As this point in this form was number raised before the High Court we cannot allow it to be raised at this stage. It was next companytended that the Assistant Sessions Judge who tried the case had numberjurisdiction to try the case as it was triable by a Special Judge only. It is clear, however, that the case had been companymitted to the Court of Session before the Criminal Law Amendment Act, 1952, came into force. Under s. 10 of this Act all cases pending before the Court of a Magistrate were transferred to the Court of a Special Judge. Section 10 did number purport to transfer cases, pending in the Court of Session at the companymencement of the Act, to the Court of the Special Judge. In the case of Asgarali Nazarali Singaporewalla v. The .State 1 , this Court observed The cases which were pending before the companyrts of sessions did number require to be so transferred because they would be tried by the procedure obtaining in the companyrts of sessions and numberhing further required to be done. It seems clear to us, therefore, that the Assistant Sessions Judge had jurisdiction to try the case as the same had been 1 1957 S.C.R. 678, 686. pending in the companyrt of Session when the Act came into force. The third companytention raised was that the companyrts below had number companyrectly appreciated the nature, extent and the quantum of proof required for raising the presumption under s. 4 of the Prevention of Corruption Act. The High Courts judgment does number show that that Court in any way raised any presumption under s. 4 against the appellant. The following passage from the High Courts judgment would make this clear It was next companytended that the evidence on the record does number satisfactorily prove that the sum of Rs.20 was received by the applicant as illegal gratification. The finding on this point is a finding of fact. I have gone through the judgment of both the companyrts below and I see numbersatisfactory reason to disagree with the companycurrent finding of both the companyrts on this point. There is ample evidence on behalf of the prosecution to the companyclusion that the sum of Rs. 20 was paid by Malekchand to the applicant on his demand in order to secure the allotment of a house. There does number appear any satisfactory reason why Malekchand should have paid Rs. 20 to the applicant to procure wheat for him. There is, therefore, numberquestion of any presumption being raised against the appellant. On the companytrary, his defence that he had taken the sum of Rs. 20 from Malekchand to purchase wheat for him was disbelieved and Malekchands evidence that he had taken this money in order to secure an allotment of a house for Malekchand was accepted. There appears to be numbersubstance in the point raised. It was next urged that the matter of sentence may be companysidered. The incident took place in 1951 and the appellant has been on bail and it would number be desirable to send him back to jail. The sentence of one years imprisonment for companyruption by a public servant cannot, however, be companysidered as unduly severe.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No.396 of 1957. Appeal from the Judgment and Order dated the 21st February, 1956, of the Bombay High Court in Income-tax Reference No. 32 of 1954., J. Kolah, J. B. Dadachanji and S. N. Andley, for the appellants. N. Rajagopal Sastri and D. Gupta, for the respondent. 1959. May 5. The Judgment of the Court was delivered by DAS, C. J.-This is an appeal brought on a certificate granted on September 19, 1956, by the High Court of Bombay under s. 66 A 2 of the Indian Income Tax Act hereinafter referred to as the said Act against its order dated February 21, 1956, in Income-tax Reference No. 32 of 1954 answering in the negative two questions of law referred to it under s. 66 1 of the said Act at the instance of the appellants. The appellants are the trustees of a charity fund known as The Charity Fund Founded by Sir Sassoon David, Baronet of Bombay . The said Sir Sassoon David, Bart. and four other persons, who were holding certain securities of the value of Rs. 24,25,000 for the purpose of charity and had been applying the same for and towards charitable purposes, executed, on June 8, 1922, a Deed of Declaration of Trust declaring that the said trust fund would be held by them on trusts more specifically therein mentioned. Clause 13 of the said deed, on the true companystruction of which depends the answer to the referred questions, runs as follows- The Trust Fund shall be held by the Trustees upon the Trusts to apply the net income thereof after providing for all necessary expenses in relation to the management of the Trust Funds for all or any of the following purposes, that is to say, a the relief and benefit of the poor and indigent members of Jewish or any other companymunity of Bombay or other parts of India or of the world either by making payments to them in cash or providing them with food and clothes and or lodging or residential quarters or in giving education including scholarships to or setting them up in life or in such other manner as to the said Trustees may seem proper or b the institution maintenance and support of hospitals and schools, companyleges or other educational institutions or c the relief of any distress caused by the elements of nature such as famine, pestilence, fire, tempest, flood, earthquake or any other such calamity or d the care and protection of animals useful to mankind or e the advancement of religion or f other purposes beneficial to the companymunity number falling under any of the foregoing purposes Provided always that in applying the income as aforesaid the Trustees shall give preference to the poor and indigent relations or members of the family of the said Sir Sassoon David, Bart., including therein distant and companylateral relations provided further that in the application of the income of the said Charitable Trust Fund the said Trustees for the time being shall observe the following proportions, viz. that number less than half the income of the said funds shall at all times be applied for the benefit of the members of the Jewish Community of Bombay only including the relations of Sir Sassoon David, Bart. as aforesaid and Jewish objects and particularly in giving donations to the members of the Jewish Community of Bombay on the anniversary of the death of the said Sir Sassoon David, Bart. and his wife Lady Hannah David which falls on the Twenty-second day of June and the remaining income for the benefit of all persons and objects including Jewish persons and objects and in such proportions as the said Trustees may think proper. Provided further that if the income of the Trust Funds for any year shall number be wholly applied during that year on the Trusts aforesaid such surplus income may be carried forward to the subsequent year or years and be applied as the income arising during that year or years. Provided also that during the life-time of Sir Sassoon David, Bart., in the application of the said income the Trustees shall have regard to the wishes of the said Sir Sassoon David, Bart., who shall also be entitled to direct if he so desires that the income of the time being of the Trust-Funds or any part thereof may be applied to such charitable object or objects as the said Sir Sassoon David, Bart., shall direct and in such case the Trustees shall so apply the income . This Deed of Declaration of Trust was, on June 4, 1953, registered under the Bombay Public Trusts Act, 1950. The Trust fund had been invested by the trustees in inter alia 3 1/2 Government Securities. In the year 1930 a certificate was issued by the Income-tax Officer, A Ward, Bombay, whereby the Reserve Bank of India was authorised number to deduct at source the tax on the interest on the said securities so held by the trustees. It was mentioned in the said certificate that it was to enure till its cancellation. In 1946 the 3 1/2 Government Securities were redeemed by the Government of India and were companyverted into 3 Con- version Loan, 1946. Accordingly in February, 1948, the said certificate of exemption was cancelled, as the securities companyered thereby had been redeemed by the Government. The trustees thereupon asked for a fresh certificate of exemption from the Income-tax Officer, Bombay Refund Circle in respect of the 3 Conversion Loan, 1946. But the said Income-tax Officer refused to issue such certificate on the ground that the income from the trust fund in question was number exempt from taxation under s. 4 3 i of the said Act which, at the material time, was as follows- 4 1 2 Any income, profits or gains falling with-in the following classes shall number be included in total income of the person receiving them- Any income, derived from property held under trust or other legal obligation wholly for religious or charitable purposes, and in the case of property so held in part only for such purposes, the income applied, or finally set apart for application, thereto Upon the fact of the withholding of the certificate by the Income-tax Officer, Refund Circle, being intimated to the Income-tax Officer, A-V Ward, Bombay, the latter Officer started proceedings against the appellants under s. 34 of the said Act in respect of the assessment years 1944-45 to 1947-48. He also started regular proceedings for the assessment year 1948-49 and the succeeding years up to 1952- 53. In the assessment proceedings for those nine years the Income-tax Officer took the view that the income from the trust fund was number exempt from taxation under s. 4 3 i and accordingly he assessed the appellants for the first four assessment years 1944-45 to 1947-48 on the ground that the income for those years had escaped assessment. He also assessed the appellants to tax for the subsequent five years 194849 to 1952-53 . On appeal the Appellate Assistant Commissioner companyfirmed the said assessments. On further appeal by the appellants, the Income-tax Appellate Tribunal set aside the assessments for the first four years 1944-45 to 1947-48 holding that s. 34 had been wrongly invoked, for it was only a case of difference of opinion of one Income- tax Officer from his predecessor on the same set of facts. The department did number take any further steps in the matter and accepted that view of the Tribunal as regards the assessments of those years and we are number in this appeal companycerned with them. As regards the assessments for the five years 1948-49 to 1952-53 the Tribunal upheld the decision of the Appellate Assistant Commissioner who had companyfirmed the assessments made by the Income-tax Officer. On application being made by the appellants, under s. 66 1 of the said Act, the Tribunal drew up a statement of case and referred two questions of law arising out of its order to the High Court for its opinion. The said questions are as follows - Whether the Trust property is held wholly for religious or charitable purposes within the meaning of section 4 3 i of the Indian Income-tax Act ? If the answer to question 1 is in the negative, whether the trust property is held in part only for religious or charitable purposes ? The said reference came up for hearing before the said High Court and both the referred questions were answered in the negative. The High Court, however, gave the appellants a certificate of fitness for appeal to this Court and the present appeal has been filed on the strength of such certificate. A perusal of cl. 13 of the deed shows that the trust fund is declared to be held by the trustees upon trusts to apply the net income thereof for all or any of the six purposes enumerated therein. It was companyceded before the High Court- and it has number been disputed before us-that if there was numberhing else in this clause, then each of these six purposes would have to be upheld as a charitable purpose involving an element of public utility and companysequently within the protection of s. 4 3 i . The fact that the trustees companyld expend the net income on any of the six purposes to the exclusion of the other five purposes would number, it is also companyceded, have made the slightest difference in the matter of such exemption from income-tax. For instance, if the trustees spent the net income solely and wholly for the purposes- mentioned under sub-cl. a to the exclusion of those mentioned in sub-cls. b to f such income would still be exempt from taxation under s. 4 3 i . The High Court, however, took the view that cl. 13 should be read as a whole along with the provisos -and that so read the trust is primarily for the benefit of the relations or members of the family 117 of Sir Sassoon David, Bart. It is pointed out that in applying the net income for the purposes mentioned in sub- cl. a , the trustees are bound, under the first proviso, to give preference to the poor and indigent relations or members of the family of the said Sir Sassoon David, Bart. including therein distant and companylateral relations. The second proviso, it is urged, makes it further clear that in the application of the income for the said purpose, the trustees are enjoined to apply number less than half the income for the benefit of the members of the Jewish companymunity of Bombay only including the relations of Sir Sassoon David, Bart., as aforesaid and the Jewish objects. Emphasis is laid on the words number less than half as indicating that it is permissible for the trustees to spend more than half and indeed the whole of the net income for the benefit of the said relations or members of the family of the said Sassoon David, Bart. It is also pointed out that, although the remaining income, if any, has to be spent for the benefit of all persons and objects including Jewish persons and objects, the trustees companyld, if they so wished, spend the same also for the relations or members of the family of Sir Sassoon David, Bart. as Jewish persons. The argument, which found favour with the High Court, is that the provisos impose a mandatory obligation on the trustees i to give preference to the poor and indigent relations or members of the family of Sir Sassoon David, Bart. and ii to spend number less than half the income, which may extend to the entire income, for the benefit of the relations or members of the family of Sir Sassoon David, Bart. The High Court points out that in view of the language of el. 13 of the deed read as a whole, it is open to the trustees, without being guilty of any breach of trust, to spend the entire net income of the trust fund for the purpose of giving relief to the poor and indigent relations or members of the family of the said Sir Sassoon David, Bart., including therein the distant and companylateral relations and such being the position, the High Court came to the companyclusion that it companyld number be said that the property was held wholly or partly for religious or charitable purposes involving an element of public utility. The High Court accordingly held that the income from the trust fund was number exempt from taxation under s. 4 3 i and answered both the questions in the negative. The problem before us is whether the High Court was right in so answering the questions. In companying to the decision that it did, the High Court relied on its own earlier decision in the case of Trustees of Gordhandas Govindram Family Charitable Trust v. Commissioner of Income-tax Central , Bombay 1 . The facts in that case, however, were somewhat different from the facts number before us. In that case the trust was significantly enough described as Gordhandas Govindram Family Charitable Trust . Clause 2 of that trust deed provided for the application of tile net income in giving help or relief to such poor Vaishyas and other Hindoos as the trustees might companysider deserving of help in the manner and to the extent specified in the said trust deed and subject to the companyditions and directions stated in the next following clauses. Sub-clause a of cl. 3 provided that Vaishya Hindoos who were members of Seksaria family should be preferred to poor Vaishyas number belonging to the said family. Maintenance had to be provided under sub-cl. b for the poor male descendants of the settlor and under sub-cl. c for the poor female descendants of the settlor. Marriage expenses were provided under sub-el. d for the poor male descendants and under sub-cl. e for the poor female descendants of the settlers There were other subclauses providing for payment of money to the poor male or female descendants of the other members of the Seksaria family. In the present judgment number under appeal, the High Court recognises that the particular trust they were dealing with in the earlier case was a fairly blatant illustration of a settlor trying to benefit his own family and his own relations and states that in the earlier case it had pointed out that the benefit to the public was too remote and too illusory and accordingly held that was 1 1952 21 I.T.R. 231. number a trust which had for its object a general public utility . Such, however, cannot be said of the provisions of the present Deed of Declaration of Trust. Under el. 13 the trustees are at liberty to hold the trust fund and to apply the net income thereof for all or any of the six purposes mentioned therein. The relations or members of the family of the said Sir Sassoon David, Bart., including therein distant and companylateral relations do number figure as direct recipients of any benefit under sub-cls. b to f and, therefore, in so far as those purposes are companycerned the trust certainly involves an element of public utility. We are number unminaful of the fact that it is open to the trustees to spend the net income entirely for the purpose referred to in sub-cl. a to the exclusion of the other clauses. But the very fact that the relations or members of the family do number companye in directly under any of those latter sub-clauses cannot be ignored, for they certainly have some bearing on the question as to who or what were the primary objects of the trust as a whole. In the next place, the purpose of sub-cl. a is the relief and benefit of the poor and indigent members of Jewish or any other companymunity of Bombay or other parts of India or of the world . It is companyceded by learned companynsel that this sub-clause clearly expresses a general charitable intention involving an element of public utility. It follows, therefore, that sub- cl. a companystitutes a valid public charitable trust having as its beneficiaries the several classes of persons referred to therein. This is the first position. We then pass on to the provisos. The first proviso opens with the words in applying the income as aforesaid . This takes us back to sub-cl. a . The meaning of the proviso obviously is that in applying the income for the purpose of sub-el. a , the trustees shall give preference to the poor and indigent relations or members of the family of Sir Sassoon David, Bart. The proviso does number operate independently but companyes into play only in applying the income as aforesaid The provision for giving preference involves the idea of selection of some persons out of a bigger class envisaged in subel. a . The poor and indigent relations or members of the family can claim to participate in the benefits under the trust only if they companye within one of the several classes enumerated in sub-el. a . To take an extreme example If a poor and indigent relation of Sir Sassoon David, Bart. abjures the faith held by the Jewish companymunity and does number adopt any other faith and thus ceases to be a member of the Jewish companymunity but does number become a member of any other companymunity, he will certainly number be entitled to the benefits of sub-el. a although he is a poor and indigent relation or member of the family of Sir Sassoon David, Bart. within the meaning of the first proviso. In other words, sub-cl. a prescribes the primary class of beneficiaries out of which the actual beneficiaries are to be selected by the application of the provisions of the provisos, that is to say, by giving preference to the relations or members of the family of the said Sir Sassoon David, Bart. The case of In re Koettgans Will Trusts 1 appears to us, on the facts, to be more in point than the case of Gordhandas Govindram Family Charity Trust case 2 relied on by the High Court. In the last mentioned English case the testatrix bequeathed her residuary estate upon trust for the promotion and furtherance of companymercial educa- tion. The persons eligible as beneficiaries under the fund were stated to be ,persons of either sex who are British born subjects and who are desirous of educating themselves or obtaining tuition for a higher companymercial career but whose means are insufficient or will number allow of their obtaining such education or tuition at their own expense The testatrix further directed that in selecting the beneficiaries it is my wish that the trustees shall give preference to any employees of John Batt Co. London Ltd. or any members of the families of such employees failing a sufficient number of beneficiaries under such description then the persons eligible shall be any persons of British birth as the trustees may select provided that the total income to be available for benefiting the pre- ferred beneficiaries shall number in anyone year be more than 75 of the total available income for that 1 1954 Ch. 252, 257. 2 1952 21 I.T.R. 231. year. It was held, on a companystruction of the will, that the gift to the primary class from which the trustees companyld select the beneficiaries companytained the necessary element of benefit to the public and that it was when that class was ascertained that the validity of the trust had to be determined, so that the subsequent direction to prefer, as to the 75 of the income, a limited class did number affect the validity of the trust which was accordingly a valid and effective charitable trust. Referring to the first part of the will Upjohn, J., at p. 257 said- If the will companycluded there, the trust would clearly be a valid charitable trust, having regard to the admission that a gift for companymercial education is for the advancement of education. Then after stating that the next task was to make a selection from that primary class of eligible persons, the learned Judge companytinued- It is only when one companyes to make a selection from that primary class that the employees of John Batt Co. and the members of their families companye into companysideration, and the question is, does that direction as to selection invalidate the primary trust ? In my judgment it does number do so. Further down he said- In my judgment it is at the stage when the primary class of eligible persons is ascertained that the question of the public nature of the trust arises and falls to be decided, and it seems to me that the will satisfies that requirement and that the trust is of a sufficiently public nature. The learned Judge then companycluded- If, when selecting from that primary class the trustees are directed to give a preference to the employees of the companypany and members of their families, that cannot affect the validity of the primary trust, it being quite uncertain whether such persons will exhaust in any year 75. On the true companystruction of this will, that is number as to 75 primarily a trust for persons companynected with John Batt Co., and the class of persons to benefit is number companyfined to them, and in my judgment the trust companytained in clauses 7 and 8 of the will of the testatrix is a valid charitable trust. It is true that this is a judgment of a Single Judge but it does number appear to have been departed from or over ruled in any subsequent case and appears to us to be based on sound principle. Applying this test, there can be numberquestion- indeed it has been companyceded that the earlier part of el. 13, omitting the provisos, companystitutes a valid public charitable trust. The circumstance that in selecting the beneficiaries under subel. a preference has to be given, under the provisos, to the relations or members of the family of Sir Sasoon David, Bart., cannot affect that public charitable trust. In our judgment, the facts of this case companye nearer to the facts of the English case referred to above than to the facts of the earlier decision of the Bombay High Court in Gordhandas Govindram Family Charity Trust case 1 . As we have already stated the relations of members of the family are clearly number the primary object companytemplated by sub-cls. b to f . The first part of sub-cl. a , omitting the provisos, is number said to be too wide or vague and unenforceable. The provision for giving preference to the poor and indigent relations or the members of the family of Sir Sassoon David, Bart., cannot affect the public charitable trust companystituted under sub-cl. a . In our opinion the income from the trust properties companyes within the scope of s. 4 3 i and is, therefore, entitled to exemption. Therefore the negative answer given by the High Court to question No. I cannot be supported and that question should be answered in the affirmative. In this view of the matter, question No. 2 does number arise and needs numberanswer.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 373 of 1957. Appeal from the judgment and decree dated September 20, 1955, of the former Madhya Bharat High Court at Indore in Civil Misc. Case No. 40 of 1954. , K. Daphtary, Solicitor-General of India, K. N. Rajagopal Sastri, R. H. Dhebar and D. Gupta, for the appellant. S. Shukla, for the respondent. 1959. May 20. The Judgment of the Court was delivered by KAPUR J.-This appeal on a certificate by the High Court is brought against the judgment of the High Court of Madhya Bharat in a Reference by the Income-tax Appellate Tribunal under s. 66 1 of the Income-tax Act. The appellant is the Commissioner of Income-tax and the respondents are a firm of manufacturers of perfumery and hair oils at Ratlam in Madhya Bharat and their goods are sold throughout India. At the relevant time Madhya Bharat was a Part B State and the sole question for determination is where were the income, profits and gains, received or were deemed to be received and on that would depend the rate at which the respondents would be liable to be assessed because of the companycessional rates applicable to Part B States. The facts lie in a short companypass. The respondents, a registered firm, were assessed for the assessment year 1950- 51, at the rate or rates applicable to income, profits and gains arising or accruing in Part A States. The companyrse of their business was this they sent out agents to various parts of India. They canvassed orders and sometimes took advance payments in full or in part and after deducting their expenses, remitted the balance to the respondents at Ratlam through Bank drafts etc. The goods ordered were sent to the customers either by V. P. P. or by rail. In the latter case the Railway Receipts in favour of self were sent through a Bank deliverable against payment of the Demand Draft drawn upon the buyers and sent with the Railway Receipts. This price when received by the Bank was sent by the Bank by means of Bank Draft to the respondents at Ratlam who sent them for being cashed and credited to their account at Bombay. The Income-tax Officer held that the major quantity of goods was supplied to the customers in what was Part A C States either by V. P. P. or by rail, the Railway Receipts being in favour of the respondents and payment was received as stated above. The assessees banker was the Bank of India Ltd., Bombay, and the sale proceeds were, according to the Income-tax Officer, mainly realised through this Bank. He held that the sales were effected in Part A C States and the payments were also received there. He therefore made the assessment on an estimated profit of Rs. 1,60,340 on sales of Rs. 5,09,424 without allowing any rebate on account of companycessional rates applicable to Part B States. On appeal the Appellate Asstt. Commissioner reduced the estimated profit by Rs. 20,000. The Income-tax Appellate Tribunal on further appeal reduced the total income from Part A C States to Rs. 2,85,376. It found that the income received through the Post Office, i.e., by V.P.P. was Rs. 1,23,710 and that received in respect of goods sent by rail and realized by the Bank drafts was Rs. 2,85,376 making a total of Rs. 4,21,955. It also held that the advances received with orders were income, profits and gains received at Ratlam and number in Part A C States and similarly the price of goods sent by V. P. P. was also money received at Ratlam. In regard to the price received by Bank drafts it held that they were received at Ratlam but were sent to the assessees banker in Bombay for being cashed and therefore they must be taken to have been received in a Part A State. This amount was Rs. 2,85,376. The Tribunal after referring to the decision of the Bombay High Court in Kirloskar Bros. Ltd. v. The Commissioner of Income-tax 1 said - The facts, however, in this case are entirely different. It appears from the printed advice sent by the assessee to its bankers in every case that the bankers are to hand over the goods against payment of t he enclosed demand draft. It is number a case where the assessee gives unconditional discharge on the receipt of either a cheque or a bank draft. We agree with the Appellate Assistant Commissioner that sale proceeds to the extent of Rs. 2,85,376 were received at Bombay. Both the assessees and the Commissioner applied for a reference -to the High Court under s. 66 1 of the Income- tax Act and following two questions were referred - Q.1 Whether the receipt of sale proceeds at Ratlam which included the assessees profits in respect of goods sent by the assessee to customers in Part A or C States by V. P. P. amounted to receipts of income, profits or gains at Ratlam in Part B States? Q. 2. Whether the bank drafts payable in Part A or C States but received at Ratlam and encashed through the assessees bankers at Bombay companystituted receipts in Part A State ? The High Court answered both these questions in favour of the assessees but gave a certificate and the 1 1952 21 I.T.R. 82. appeal is therefore brought by the Commissioner of Income- tax. Apart from the sales which were deemed to have taken place in Ratlam itself the goods were, as stated above, supplied to the customers in one of the following two ways. The goods were either sent from Ratlam through the post office by V. P. or they were sent from there by rail and the Railway Receipts in favour of self were sent through a Bank with the direction that the goods were to be handed over against payment of the enclosed demand draft. We Shall first deal with that part in which the goods were sent by post under the V. P. P. system. The purpose of this system is given in Rule 133 of the Post Offices guide as under- The V. P. P. system is designed to meet the requirements of persons who wish to pay for articles sent to them at the time of the receipt of the articles or of the bill or railway receipt relating to them and also to meet the requirements of the traders and others who wish to recover through the agency of the post office, the value of articles supplied by them. In the case of delivery of goods by V. P. P. it is im- material whether the buyer directs the goods to be sent by P. P. or the seller does so on his own accord because the goods handed over to the Post Office by the seller can only be delivered to the buyer against payment and this payment is received for and on behalf of the seller. The buyer does number pay till the goods are received by him and once he has paid -the price it is the Post Office that is responsible for payment of the money received by it to the seller. The buyer has numberlonger any responsibility in regard to it. Therefore a payment to the Post Office is payment to the seller and at the place where the goods are delivered and payment is made. Further before the goods are delivered to the buyer the seller has under the V. P. P. Rules the power to direct the Post Office to make the delivery to the addressee free or to deliver against a sum different from that originally specified. This would negative the Post Office being an agent of the buyer. This shows that whatever be the jural relationship between the seller and the post office in respect of carriage of goods sent by the seller under the V. P. P. system it becomes an agent of the seller for the recovery of the price and if it fails to recover the price and delivers the goods it is liable in damages to the seller Mothi Rungaya Chetty v. The Secretary of State for India 1 . Under the V. P. P. system the seller retains companytrol over the goods right up to the time the goods are delivered to the buyer against payment of price and therefore the companytract would fall under s. 25 of the Indian Sale of Goods Act which provides- Section 25 1 . 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. The principle then is this that if the seller when sending the articles which he intends to deliver under the companytract does so, with the direction that the articles are number to be delivered to the purchaser till the payment of price, the appropriation is number absolute but companyditional and until the price is paid the property in the goods does number pass to the purchaser. Mirabita v. Imperial Ottomon Bank 2 at pp. 172-173 Cotton, L.J. . See also The Parchim 3 at pp. 170-171 Per Lord Parker . And the goods pass at the place where the price is paid, i.e., which in the present case was in an A or C State. Thus the price was received by the seller in A or C State. But it was submitted on behalf of the respondents that to the present case the judgment of this Court in Commissioner of Income-tax v. Ogale Glass Works Ltd. 4 applies. There the assessee was a companypany which was 1 1904 I.L.R. 28 Mad. 213, 2 1878 3 Ex. D. 164. 3 1918 A. C. 1157. 4 1955 1 S.C.R. 185. carrying on business in an Indian State outside British India and its liability to Indian Income-tax depended upon its receipt of money within British India. The assessee had to be paid for goods supplied to the Government of India and at his request the Government of India agreed to make payments by cheques which were drawn in Delhi on a Bombay Bank and were posted in Delhi and received by the assessee in the Indian State. It was held that the Post Office was the agent of the assessee. The principle of that case has numberapplication to the facts of the present case. That case did number deal with sale of goods or receipt of price against delivery of goods or the place where the price of goods is received by the seller. Reference was also made by the respondents companynsel to a judgment of the House of Lords in The Badische Anilin Und Soda Fabrik v. The Basle Chemical Works 1 . In that case a trader in England ordered goods from a manufacturer in Switzerland to be sent by post to England. The manufacturer addressed the goods to a forwarding agent who in turn addressed them to the trader in England and delivered them to the Swiss Post Office by whom they were forwarded to England. The goods were such that they invaded an invention protected by an English patent. It was held that the companytract of sale was companypleted by delivery to the post office in Switzerland and as the post office was the agent of the buyer and number of the vendor the vendor companyld number be said to have companytravened the invention within the ambit of the patent and that the patentee had numberright of action against the vendor for an infringement of the patent. In that case also there was numberquestion of the Swiss manufacturer keeping companytrol over the goods till the price was paid number of any companyditional delivery to the post office as in the present case and besides that was number a case dealing with the passing of the ownership in goods or the appropriation of goods to the companytract of sale by delivery to a carrier. The argument raised by companynsel for respondents was that the respondents delivered the goods to the Post Office at the instance of the buyer and that the Post 1 1898 A.C. 200. Office acted merely as a bailee for the purpose of transmission to the buyer. But even as such bailee it cannot act against the instructions of the bailor and deliver the goods to the buyer without receiving their price and when he does recover he recovers it on behalf of the bailor. Even a bailment for transmission would fall under s. 25 of the Sale of Goods Act and there is only a companyditional appropriation and until the companydition imposed is fulfilled the goods do number pass. Under s. 148 of the Indian Contract Act a bailment is delivery of goods by one person to another upon a companytract that they shall, when the purpose is accomplished be returned or otherwise disposed of according to the directions of the person delivering them. A bailees duty therefore is to deal with the goods according to the directions of the bailor and if the direction in the present case was that the goods were to be delivered to the buyer on payment then the bailee would receive the price on behalf of the seller at the place where the goods were delivered to the buyer. Thus the principle governing a despatch of articles by V. P. P. is that the appropriation is companyditional and goods only pass when the companydition is fulfilled, i.e., the price is paid against delivery. The Post Office is an agent for the seller and receives the price from the buyer at the place of delivery for transmission to the seller. The income in the present case was therefore received in Part A or Part C States and number in Ratlam. In our opinion, the answer to the first question should have been in favour of the Commissioner. It should have been held that the income in respect of goods sent by V. P. P. was received in Part A and C States and number in a Part B State. The next question is unfortunately number properly framed and therefore it is necessary to reframe it as was done in Narain Swadeshi Weaving Mills v. The Commissioner of Excess Profits Tax 1 . The proper question that arises on the facts is Whether on the facts and circumstances of this case the payment received from a buyer by a banker in Part A or C 1 1955 1 S.C.R. 952. States against delivery of Railway Receipt for goods sent by the seller is payment in these States or in Ratlam which was a Part B State . We have already set out the companyrse of business in regard to the second mode of supply of goods, i.e., goods were sent by rail and the Railway Receipts in favour of self were sent through a Bank with the direction that they were to be delivered against payment of demand drafts drawn and sent along with the Railway Receipts. Now in this case as in the case of goods sent by V. P. P. the Railway Receipts in favour of self companyld number be delivered to the buyer till the money was paid and although the goods had been handed over to a companymon carrier the appropriation to the companytract was only companyditional and the performance was companypleted only when the monies were paid and the Railway Receipts delivered. These companytracts also must be taken to have been performed in Part A or C States and the price paid to the Bank as agent of the seller at the place of payment and delivery of Railway Receipts. The income, profits and gains were therefore received in these States and number at Ratlam. This question should also have been answered in favour of the Commissioner and the income, profits and gains arising out of these transactions must be held to have been received by respondents in Part A or C States. In both the cases the respondents would number be entitled to a companycessional rate of taxation applicable to Part B States. The appeal is therefore allowed.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 326 of 1957. Appeal by special leave from the judgment and order dated February 16, 1955, of the Orissa High Court in N. J. C. No. 117 of 1951. K. Daphtary, Solicitor-General of India, K. N. Rajagopal Sastri, R. H. Dhebar and D. Gupta, for the appellants. Rameshwar Nath, S. N. Andley and J. B. Dadachanji, for the respondent. 1959. May 5. The Judgment of the Court was delivered by KAPUR, J.-This appeal pursuant to special leave is brought by the Commissioner of lncome-tax against the judgment of the High Court of Orissa holding that the amounts received by the assessees-respondents were number received in what was British India and therefore number liable to income-tax. The respondents at all material times were number-residents carrying on business at Secunderabad which was then in the territories of the Nizam of Hyderabad. They acted as agents for the supply of gas plants manufactured by Messrs. T. V. S. Iyengar Sons, Madura, to the Nizams Government, and also as agents of the Lucas Indian Services, Bombay branch, for the supply of certain goods to that Government. The year of assessment is 1945-46. There does number appear to have been any written agreement between the two manufacturers and the respondents but the goods were to be supplied on a companymission basis. In pursuance of this agreement the respondents received from M s. T.V.S. lyengar Sons, Madura, cheques drawn on the Imperial Bank of India, Madras, amounting to Rs. 35,202 in respect of all goods supplied from -Madura and also from Lucas Indian Services, Bombay, by cheques drawn on Imperial Bank of India, Bombay branch, amounting to Rs. 5,302 in respect of goods supplied by them, thus making a total of Rs. 40,504. These cheques were sent by post and when received by the respondents at Secunderabad were credited in the account books of the respondents and sent to their banker G. Raghunathmal for companylecting and crediting to the account of the respondents. As against these sums so deposited the respondents at once drew cheques and thus operated on these amounts deposited. In regard to the companymission received from the Bombay firm it was paid into the account on December 22, 1944, but was given credit for only on January 2, 1945. The Income-tax Officer assessed these sums as taxable income holding that the entire amount of Rs. 40,504 was received in British India and number at Secunderabad. An appeal was taken by the respondents to the Appellate Assistant Commissioner who upheld the order holding that income must be held to have accrued, arisen or received in British India. Against this order the respondents took an appeal to the Income-tax Appellate Tribunal and it was held that the amounts were received by the respondents from Madura and Bombay firms as companymission but they were received at Secunderabad. The appeal was therefore allowed. The finding Of the Appellate Tribunal in their own words was- The companytention of the Appellants is that the cheques being negotiable instruments and the creditor having accepted them and passed through their books, II the receipt must be taken to be receipts in Hyderabad. We agree with the view submitted by the appellants. In Bhashyams Negotiable Instruments Act, 8th Edition, Revised, page 556, it is stated that it will be open to a creditor to accept a cheque in absolute payment of money due to him, in which case it will be equivalent to cash payment. That being the position it cannot be said that the income was received in British India . At the instance of the Commissioner a reference under s. 66 1 of the Act was made to the High Court of Orissa for their opinion on the following question - Whether in the circumstances of the case, the sums of Rs. 35,202 and Rs. 5,302 received as companymission from T. V. S. lyengar Sons Ltd., and Lucas Indian Services Ltd., respectively were income that accrued, arose or were received in British India . The High Court found that the statement of case was imperfect and that the real question was different. It said The real question in all such cases is number merely whether the cheques were drawn on a bank in British India, and sent for companylection to that bank. The question is whether when the cheques were received by the assessee having his place of business outside British India, those cheques were in fact received as absolute and final payments by way of unconditional discharge or whether they were received as mere companyditional payments on realisation. The fact that cheques were drawn on a bank in British India or that they were sent for companylection through a Secunderabad banker of the assessee though relevant, are number companyclusive . It therefore remitted the case to the Appellate Tribunal for submission of supplementary statement of case. It appears that at that stage the companytroversy was companyfined to the question whether the cheques having been sent to Secunderabad and having been realised in British India would amount to a final discharge or an unconditional one. The Tribunal in its supplementary statement found that the companyrse of companyduct followed by the parties showed that the cheques were received from the Bombay and Madura firms in full satisfaction of the companymission ascertained from time to time and due on such date. It said The facts that such entries were made in the assessees books, that the cheques were put into the bank immediately, that the bank at once gave credit to the assessee for these sums after charging discount thereon and immediately allowed the assessee to operate on those sums are significant . Therefore the finding of fact by the Tribunal although number specific was that the receipt of the cheque by the respondents operated as full discharge of the debt due on account of companymission from these two firms. The matter was decided by the High Court against the appellant and in the meanwhile this Court had given a judgment in Commissioner of Income-tax v. Ogale Glass Works Ltd 1 . Even after companysidering the decision of that case the High Court was of the opinion that the income of the respondents was number received in British India and answered the question against the Revenue. The High Court refused to give leave to appeal to this Court and it was this Court which gave special leave to appeal. The question is whether the amounts, of companymission paid by cheques, drawn respectively on banks at Madras and Bombay and respectively posted from Madura and Bombay, can in the circumstances of this case be held to have been received in what was British India or at Secunderabad ? The Appellate Tribunal found that all the cheques whether from Madura or from Bombay were sent by the two respective firms from Madura or Bombay and were received by the respondents at Secunderabad and were treated as payment. The question still remains as to the effect of the sending of the cheques from Madura or Bombay by post. If there is an express request by the 1 1955 1 S. C. R. 185. creditor that the amount be paid by cheques to be sent by post and they are so sent there is numberdoubt that the payment will be taken to be at the place where the cheque or cheques are posted. The respondents argued that there was an agreement between the Madura and Bombay firms and the respondents that the money would be paid whether in cash or by cheque at Secunderabad and therefore when the cheques were sent by post the post office was the agent of the debtor and number of the respondents. There is in support of the respondents an affidavit which was filed in the assessment proceedings and which was relied upon in the High Court. According to this affidavit it was verbally agreed that the companymission would be paid at Secunderabad in cash or by cheque as the case may be , the language used in the affidavit was The above companymission was verbally decided to be paid to Messrs. Patney Co. Ltd., Secunderabad the Agent Company in Hyderabad State at Secunderabad in cash or by cheque as the case might be . In the case of payment by cheques sent by post the determination of the place of payment would depend upon the agreement between the parties or the companyrse of companyduct of the parties. If it is shown that the creditor authorised the debtor either expressly or impliedly to send a cheque by post the property in the cheque passes to the creditor as soon as it is posted. Therefore the post office is an agent of the person to whom the cheque is posted if there be an express or implied authority to send it by post Commissioner of Income-tax v. Ogale Glass Works Ltd. 1 . In that case there was an express request of the assessee to remit the amount of the bills outstanding against the debtor, that is, Government of India by means of cheques. But it was observed by this Court that according to the companyrse of business usage in general which has to be companysidered as a part of the surrounding circumstances the parties must have intended that the cheques should be sent by post which is the usual and numbermal mode of transmission and therefore the posting of cheques in Delhi amounted to payment in 1 1955 1 S.C.R. 185. Delhi to the post office which was companystituted the agent of the assessee. But it was argued for the respondents that in the absence of such a request the post office companyld number be companystituted as the agent of the creditor and relied on a passage in Ogales case 1 at p. 204 where it was observed- Of companyrse if there be numbersuch request, express or implied, then the delivery of the letter or the cheque to the post office is delivery to the agent of the sender himself . It was further companytended that in this case there was an express agreement that the payment was to be made at Secunderabad and therefore the matter does number fall within the rule in Ogale Glass Works case 1 and the following principle laid down in judgment by Das, J. as he then was , is inapplicable - Applying the above principles to the facts found by the Tribunal the position appears to be this. The engagement of the Government was to make payment by cheques. The cheques were drawn in Delhi and received by the assessee in Aundh by post. According to the companyrse of business usage to which, as part of the surrounding circumstances, attention has to be paid under the authorities cited above, the parties must have intended that the cheques should be sent by post which is the usual and numbermal agency for transmission of such articles and according to the Tribunals finding they were in fact received by the assessee by post.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 291 of 1956. Appeal from the judgment and order dated November 25, 1955, of the Circuit Bench of the Punjab High Court at Delhi, in Civil Writ Application No. 189-D of 1955. Jai Gopal Sethi, J. B. Dadachanji, S. N. Andley, Rameshwar Nath and P. L. Vohra, for the appellant. H. Dhebar and T. M. Sen, for respondent No. 1. S. Pathak, V. P. Nayar and Janardan Sharma, for respondent No. 3. 1959. May 13. The Judgment of the Court was delivered by WANCHOO J.-This appeal companyes before us on a certificate granted by the Punjab High Court under, Art. 133 1 a and c of the Constitution. The appellant is the manager, Hotel Imperial, New Delhi here in after called the hotel while the respondents are the Chief Commissioner, Delhi, the Additional Industrial Tribunal, Delhi , and the Hotel Workers Union, Katra Shahanshahi , Chandni Chowk, Delhi. The main companytesting respondent is respondent No. 3 here- inafter called the union . A dispute arose between the hotel and its workmen in October 1955. It was referred to an Industrial Tribunal on October 12, 1955, by the Chief Commissioner of Delhi. The portion of the order of reference, relevant for our purposes, is in these terms- Whereas from a report submitted by the Director of Industries and Labour, Delhi under s. 12 4 of the Industrial Disputes Act, 1947 as amended, it appears that an industrial dispute exists between the management of the Hotel Imperial, New Delhi and its workmen as represented by the Hotel Workers Union, Katra Shahanshahi, Chandni Chowk, Delhi AND whereas on a companysideration of the said report the Chief Commissioner, Delhi, is satisfied that the said dispute should be referred to a tribunal Then follows the order referring the dispute to the Additional Industrial Tribunal, Delhi including the terms of reference. Soon after the hotel filed a writ application in the Punjab High Court challenging the order of reference on a variety of grounds. The writ application was heard by the High Court and dismissed on November 25, 1955. The hotel then applied for leave to appeal to this Court, which was granted on January 13, 1956. The hotel obtained stay of the proceedings before the Additional Industrial Tribunal from this Court on February 27, 1956. That is how this dispute which would have been otherwise decided long ago is still in its initial stage. The main companytention on behalf of the hotel is -that the reference is incompetent and two grounds have been urged in support of it namely, 1 the union companyld number be made a party to the reference under the Industrial Disputes Act, 1947, hereinafter called the Act and 2 the reference was vague, as it did number indicate how many of the 480 workers of thirty different categories working in the hotel were involved in the dispute. We are of opinion that there is numberforce in these grounds of attack. An industrial dispute for our purposes has been defined in s. 2 k of the-Act as meaning any dispute or difference between employers and workmen which is companynected with the employment or number-employment or the terms of employment or with the companyditions of labour, of any person. Section 10 1 of the Act gives power to the appropriate government where it is of opinion that an industrial dispute exists or is apprehended to refer the dispute to a tribunal for adjudication. It cannot be denied on the facts of this case that there was a dispute between the hotel and its workmen and it went to this length that the hotel decided to dismiss a large number of workmen on October 7, 1955. It is also undoubted that the dispute was With respect to the terms of employment Qr companyditions of labour of the workmen. The Chief Commissioner would therefore have power under s. 10 1 of the Act to make a reference of the dispute to a tribunal for adjudication. The attack of the hotel is on the form in which the reference was made and the companytention is that the reference in this form is incompetent. We have already set out the relevant part of the order of reference giving the form in which it was made. The two parties to the dispute are clearly indicated, namely, 1 the employer which is the management of the hotel and 2 the workmen employed in the hotel. The objection, however, is that the words as represented by the Hotel Workers Union, Katra Shahanshahi, Chandni Chowk, Delhi which appear in the order of reference make it incompetent, inasmuch as the union companyld number be made a party to the reference. We are of opinion that this objection is a mere technicality, which does number affect the companypetence of the order of reference. The fact remains that the dispute which was referred for adjudication was between the employer, namely the management of the hotel, and its employees, which were mentioned as its workmen. The addition of the words as represented by the Hotel Workers Union, Katra Shahanshahi, Chandni Chowk, Delhi was merely for the sake of companyvenience so that the tribunal may know to whom it should give numberice when proceeding to deal with the reference. That however did number preclude the workmen, if they wanted to be represented by any other union, to apply to the tribunal for such representation or even to apply for being made parties individually. Section 36 of the Act provides that a workman who is party to a dispute shall be entitled to be represented in any proceeding under the Act by a an officer of a trade union of which he is a member, or b an officer of a federation of trade unions to which the trade union of which he is a member is affiliated or c where the workmen is number a member of any trade union, by an officer of any trade union companynected with, or by any other workman employed in, the industry in which the workman is employed. The fact therefore that in the order of reference the quoted words were added for the sake of companyvenience as to where the numberice to the workmen should be sent would number in our opinion make the reference incompetent. The objection further is that even if the workman is entitled to be represented by an officer of a trade union of which he is a member, the reference in this case does number mention any officer of the trade union, but mentions the union itself. This in our opinion is a technicality upon technicality, for the union number being a living person can only be served through some officer, such as its president or secretary and it is that officer who will really represent the workmen before the tribunal, We are therefore of opinion that the reference which is otherwise valid does number become incompetent simply because it is mentioned therein that the workmen will be represented by such and such union in the dispute. We may in this companynection point out that the large majority of references under the Act which we have companye across are usually in this form and the reason for it is obvious, namely, the companyvenience of informing the tribunal to whom-it should send a numberice on behalf of the workmen, whose number is generally very large. We therefore reject the companytention that the reference is bad simply because in the order of reference the words as represented by the Hotel Workers Union, Katra Shahanshahi, Chandni Chowk, Delhi have been added. Equally, we see numberforce in the other ground of ,attack, namely, that the reference is bad because it does number specify how many of the 480 workmen of thirty different categories were involved in the dispute. It is in our opinion unnecessary for the purposes of s. 10 where the dispute is of a general nature relating to the terms of employment or companyditions of labour of a body of workmen, to mention the names of particular workmen who might have been responsible for the dispute. It is only where a dispute refers to the dismissal etc., of particular workmen as represented by the union that it may be desirable to mention the names of the workmen companycerned. In this case, the dispute was also about workmen to whom numberice of dismissal had been given and in that companynection the names of the workmen companycerned were mentioned in the order of reference. We may in this companynection refer to State of Madras v. C. P. Sarathy 1 , where a similar attack on the companypetence of a reference was made on the ground of vagueness. I In that case the reference was in these terms WHEREAS an industrial dispute has arisen between the workers and managements of the cinema talkies in the Madras City in respect of certain matters 1 1953 S.C. R - 334. AND WHEREAS in the opinion of His Excellency the Governor of Madras, it is necessary to refer the said industrial dispute for adjudication Thereafter followed the order of reference, which did number even companytain the terms of reference. The order however indicated that the Industrial Tribunal may, in its discretion, settle the issues in the light of a preliminary enquiry which it may hold for the purpose and thereafter adjudicate on the said industrial dispute. The Commissioner of Labour was requested to send companyies of the order to the managements of cinema talkies companycerned. It was held there that the reference to the Tribunal under s. 10 1 of the Industrial Disputes Act, 1947, cannot be held to be invalid merely because it did number specify the disputes or the parties between whom the disputes arose . It was further held that the Government must, of companyrse, have sufficient knowledge of the nature of the dispute to be satisfied that it is an industrial dispute within the meaning of the Act, as, for instance, that it relates to retrenchment or reinstatement. But, beyond this numberobligation can be held to lie on the Government to ascertain particulars of the disputes before making a reference under s. 10 1 or to specify them in the order. The present reference as companypared to the reference in that case cannot be called vague at all. Here the parties to the dispute are clearly specified, namely, 1 the management of the hotel, and ii its workmen. The nature of the dispute is also specified in, the terms of reference. It was in our opinion entirely unnecessary to mention in the order of reference as to who were the workmen who were responsible for the dispute. We are therefore of opinion that this attack on the ground of vagueness also fails. There is numberforce in this appeal and it is hereby dismissed with companyts to respondent No. 3.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 198 to 200 of 1959. Appeals from the judgment and order dated the 5th March 1959, of the Andhra Pradesh High Court, in Writ Petitions Nos. 1511 and 1512 of 1958 and 23 of 1959. C. Chatterjee, G. Suryanarayana, K. Mangach and T. V. Tatachari, for the appellants. Narasaraju, Advocate-General for the State of Andhra Pradesh, D. Venkatappiah Sastry and T. M. Sen, for the respondents. 1959. August 21. The Judgment of the Court was delivered by SUBBA RAO J.-These appeals on certificates are directed against the judgment of the High Court of Judicature, Andhra Pradesh, at Hyderabad, dismissing the petitions filed by the appellants under Art, 226 74 of the Constitution for issuing writs of certiorari to quash the orders of the Government of Andhra Pradesh companyfirming a scheme of nationalization of transport and the subsequent orders of the Regional Transport Authority cancelling the appellants stage carriage permits. These appeals are the off-shoot of the judgment of this Court in Gullapalli Nageswara Rao v. Andhra Pradesh State Road Transport Corporation 1 delivered on November 5, 1958. The facts were fully stated therein. It would be only necessary to recapitulate briefly the facts relevant to the present enquiry The appellants were carrying on motor transport business for several years in Krishna District in the State of Andhra Pradesh. Shri Guru Pershad, styled as the General Manager of the State Transport Undertaking of the Andhra Pradesh Road Transport, published a scheme for nationalization of motor transport in the said State from the date to be numberified by the State Government. Objections to the said proposed scheme were invited by the State Government, and the appellants, among others, filed their objections. On December 26, 1957, the Secretary in charge of the Transport Department gave a personal hearing to the objectors and heard the representations made on behalf of the State Transport Undertaking. The entire material gathered by him was placed before the Chief Minister of the State in charge of transport who made the order approving the scheme. The approved scheme was published in the Andhra Pradesh Gazette dated January 9, 1958, and it was directed to companye into force with effect from January 10, 1958. Thereafter the Andhra Pradesh Road Transport Corporation, which was formed under the provisions of the Road Transport Corporation Act, 1950, took over the Undertaking and proceeded to implement the scheme under a phased programme. The appellants moved this Court under Art. 32 of the Constitution for quashing the said scheme on various grounds. This Court rejected most of the objections raised by the appellants except in regard to two pertaining to the hearing given by the Secretary in charge 1 1959 S.C.R. SUPPl 319. of the Transport Department which resulted in the quashing of the order of the Government approving the scheme and directing it to forbear from taking over any of the routes on which the appellants were engaged in transport business. After the said order, numberices were issued by the Government to all the objectors informing them that a personal hearing would be given by the Chief Minister on December 9, 1958, and they were further informed that they were at liberty to file further objections before November 30, 1958. The Chief Minister heard the representatives of the objectors and the Corporation and passed orders dated December 19, 1958, rejecting the objections filed and approving the scheme as originally published. The order approving the scheme was duly published by the Government in the official Gazette oil December 22, 1958. On December 23, 1958, the Corporation applied to the Road Transport Authority for the issue of permits for plying stage carriages and for eliminating the permits granted to the private bus operators. On --December 24, 1958, the said Authority passed orders rendering the permits of the appellants ineffective from December 24, 1958, and also issuing permits to the Corporation in -respect of the routes previously operated by the appel- lants. The said orders were companymunicated to the appellants on December 24, 1958, and they were also directed to stop plying their buses from December 25, 1958, on their respective routes. The appellants, who were aggrieved, by the orders of the Government as well by the order of the Regional Transport Authority filed petitions in the High Court under Art. 226 of the Constitution for quashing the same. The petitions were heard by a Division Bench of the said High Court companysisting of Chandra Reddy, C.J., and Srinivasachari, J., who negatived the companytentions raised by the appellants and dismissed the petitions. Hence these appeals. The arguments of Mr. Chatterjee, learned Counsel for the appellants maybe summarized thus 1 This Court held in Gullapalli Nageswara Rao v. Andhra Pradesh State Road Transport Corporation that the 1 1959 S.C.R. SUPPL. 319. Secretary in charge of the Transport Department was disqualified from deciding the dispute between the Department and the private bus operators on the basis of the principle that a party cannot be a judge in his own cause, and that, as the Chief Minister was in charge of the portfolio of transport, the same infirmity attached to him also, and, therefore, for the same reason he should also be disqualified from hearing the objections to the scheme published by the Undertaking and 2 the Chief Minister by his acts, such as initiating the scheme, and speeches showed a clear bias in favour of the Undertaking and against the private bus operators and therefore on the basis of the principles of natural justice accepted by this Court, he was precluded from deciding the dispute between the said parties. The learned Advocate-General sought to make out a distinction between official bias of an authority which is inherent in a statutory duty imposed on it and personal bias of the said authority in favour of, or against, one of the parties and companytended that the mere fact that the Chief Minister of the Government had supported the policy of nationalization, or even the fact that the Government initiated the said scheme, did Dot disqualify him from deciding the dispute unless it was established that he was guilty of personal bias, and that there was numberlegal proof establishing the said fact. At this stage, it would be companyvenient to numberice briefly the decisions cited at the Bar disclosing the relevant principles governing the doctrine of bias . The principles governing the doctrine of bias vis-a-vis judicial tribunals are well-settled and they are i numberman shall be a judge in his own cause ii justice should number only be done but manifestly and undoubtedly seem to be done. The two maxims yield the result that if a member of a judicial body is subject to a bias whether financial or other in favour of, or against, any party to a dispute, or is in such a position that a bias must be assumed to exist, he ought number to take part in the decision or sit on the tribunal and that any direct pecuniary interest, however small, in the subject-matter of inquiry will disqualify a judge, and any interest, though number pecuniary, will have the same effect, if it be sufficiently substantial to create a reasonable suspicion of bias . The said principles are equally applicable to authorities, though they are number companyrts of justice or judicial tribunals, who have to act judicially in deciding the rights of others, i.e., authorities who are empowered to discharge quasi-judicial functions. The said principles are accepted by the learned Counsel on both sides but the question raised in this case is whether, when a statute companyfers a power on an authority and imposes a duty on it to be a judge of its own cause or to decide a dispute in which it has an official bias, the doctrine of bias is qualified to the extent of the statutory authorization. In The King v. Bath Compensation Authority 1 the licensing justices of a companynty borough referred the application for the renewal of the licence of a hotel to the companypensation authority of the borough and also resolved that a solicitor should be instructed to appear before the companypensation authority and oppose the renewal of the licence on their behalf. The solicitor so instructed appeared before the authority and supported the opposition, and in the result the companypensation authority refused the renewal subject to payment of companypensation. It may be mentioned that a majority of the justices who sat on the companypensation tribunal and voted against the renewal of the licence had as members of the licensing companymittee been parties to the resolution referring the question of renewal to the companypensation authority. The Court of Appeal by a majority, Atkin, L. J., dissenting, held that in view of the provi- sions of the Licensing Act, 1910, the facts in that case did number disclose such bias or likelihood of bias as would disqualify them from sitting on the tribunal. This decision was reversed by the House of Lords on appeal reported in 1926 A.C. 586 . The House of Lords held that the decision of the tribunal, whereon three justices who referred the matter to the said authority sat, must be set aside on the ground that numberone can both be a party and a judge in the same cause, 1 1925 1 K.B. 685. Viscount Cave, L.C., meets the argument based upon the statutory duty thus at p. 592 No doubt the statute companytemplates the possibility of the licensing justices appearing before the companypensation authority and taking part in the argument for it is provided by s. 19, sub-s. 2, that the companypensation authority shall give any person appearing to them to be interested in the question of the renewal of a licence, including the licensing justices, an opportunity of being heard. But the statute numberhere says that justices who elect to appear as opponents of the renewal and take active steps such as instructing a solicitor to take their opposition affective, may nevertheless act as judges in the dispute, and in the absence of a clear provision to that effect I think that the ordinary rule, that numberone can be both party and judge in the same cause, holds good. This decision, therefore, is an authority for the pro- position that, unless the legislature clearly and expressly ordained to the companytrary, the principles of natural justice cannot be violated. In The King v. Leicester Justices 1 , a case also arising under the Licensing Consolidation Act, 1910, the kings Bench Division held that the mere fact that the licensing justice has originated an objection to the renewal of a licence does number disqualify him by reason of interest from sitting and adjudicating as a member of that authority upon the matter of that licence. Salter, J., brought out the distinction between the Bath Justices Case 2 and the case before him in the following terms, at p. The distinction is that, in that case, Parliament had number sanctioned what was done in this case it has. Dealing with the argument that there was some, risk of bias if the statutory duty was discharged, the learned Judge rejected it with the observation that some risk of bias is inseparable from the machinery which Parliament has set up . At first sight this judgment appears to be inconsistent with the decision 1 1927 1 K.B. 557. 2 1925 1 K.B. 685. of the House of Lords in Bath Justices Case 1 , but a scrutiny of the latter case shows that in that case the licensing justices had themselves actively opposed the renewal of the licence before the companypensation authority and instructed a solicitor to do so on their behalf This is number a duty cast on them by the statute whereas the licensing justices in dealing with an application for renewal of a licence and, when the question of renewal was referred for decision to the companypensation authority, in sitting as members of that authority are merely carrying out the duties in accordance with the procedure prescribed by the legislature. These decisions show that in England a statutory invasion of the companymon law objection on the ground of bias is tolerated by decisions, but the invasion is companyfined strictly to the limits of the statutory exception. It is number out of place here to numberice that in England the Parliament is supreme and therefore a statutory law, however repugnant to the principles of natural justice, is valid whereas in India the law made by Parliament or a State Legislature should stand the test of fundamental rights declared in Part III of the Constitution. In the instant case the relevant provisions of the Act do number sanction any dereliction of the principles of natural justice. Under the Act a statutory authority, called the Transport Undertaking, is created and specified statutory functions are companyferred on it. The said Undertaking prepares a scheme providing for road transport service in relation to an area to be run or operated by the said Undertaking. Any person affected by the Scheme is required to file objections before the State Government and the State Government, after receiving the objections and representations, gives a personal hearing to the objectors as well as to the Undertaking and approves or modifies the scheme as the case may be. The provisions of the Act, therefore, do number authorise the Government to initiate the scheme and thereafter companystitute itself a judge in its own cause. The entire scheme of the Act visualises, in case of companyflict between the Undertaking and the operators of private buses, that the State Government 1 1925 1 K.B. 685. should sit in judgment and resolve the companyflict. The Act, therefore, does number authorise the State Government to act in derogation of the principles of natural justice. The next question is whether the State Government, in the present case, acted in violation of the said principles. The argument that as this Court held in the previous stage of this litigation that the hearing given by the secretary in charge of the Transport Department offended the principles of natural justice, we should hold, as a logical companyollary to the same, that the same infirmity would attach to the Chief Minister. This argument has to be rejected on two grounds firstly, for the reason that on the last occasion the appellants did number question the right of the Chief Minister to decide on the objections to the scheme,- and indeed they assumed his undoubted right to do so-but canvassed the validity of his order on the basis that the secretary, who was part of the Transport Department, gave the hearing and number the Chief Minister and, therefore, a party to the dispute was made a judge of his own cause. If, as it is number companytended, on the same reasoning the Chief Minister also would be disqualified from deciding the dispute, that point should have been raised at that stage instead, a distinction was made between the Secretary of a Department and the Chief Minister, and the validity of the order of the Chief Minister was questioned on the basis of this distinction. This Court accepted that argument. Having obtained the judgment of this Court on that basis, it companyld number be open to the appellants, at this stage, to reopen the closed companytroversy and take a companytrary position. That apart, there are numbermerits in this companytention. There is a clear distinction between the position of a Secretary of the Department and the Chief Minister of the State. Under the Constitution, the Governor is directed to act on the advice of the Ministers headed by the Chief Minister. In exercise of the powers companyferred by cls. 2 and 3 of Art. 166 of the Constitution the Governor of Madras made rules styled as The Madras Government Business Rules and Secretariat Instructions, and r. 9 thereof prescribes that without prejudice to the provisions of r. 7, the Minister in charge of a department shall be primarily responsible for the disposal of the business pertaining to that department. The Governor of Andhra,in exercise of the powers under the Constitution, directed that until other provisions are made in this regard the business of the Government of Andhra shall be transacted in accordance with the said Rules. It is, therefore, manifest that under the Constitution and the Rules framed thereunder a Minister in charge of a department is primarily responsible for the disposal of the business pertaining to that department, but the ultimate responsibility for the advice is on the entire ministry. But the position of the Secretary of a department is different. Under the said Rules, the Secretary of a department is its head i.e., he is part of the department. There is an essential distinction between the functions of a Secretary and a Minister the former is a part of the department and the latter is only primarily responsible for the disposal of the business pertaining to that department. On this distinction the previous judgment of this Court was based, for in that case, after pointing out the position of the Secretary in that Department, it was held that though the formal orders were made by the Chief Minister, in effect and substance, the enquiry was companyducted and personal hearing was given by one of the parties to the dispute itself . We cannot, therefore, accept the argument of the learned Counsel that the Chief Minister is part of the department companystituted as a statutory Undertaking under the Act. The next question is whether the Chief Minister by his acts and speeches disqualified himself to act for the State Government in deciding the dispute. In the affidavit filed by Nageswara Rao, one of the appellants herein, in respect of the writ petitions filed in the High Court, he states in ground 8 of paragraph 14 thus He the Chief Minister is the Minister in charge of the Transport Department at whose instance the Scheme was first published under Section 68C of the Act. He is number only the initiator of the Scheme but also the person who is interested in its approval and implementation. He has thus a direct and specific companynection with the dispute being a party thereto and he would be acting as a Judge in his own cause when he gives a personal hearing and companysiders the objections. Mr. Chatterjee companytends that this allegation embodied in ground 8 has number been companytradicted by the respondents. It is number companyrect to say that these allegations went unchallenged, for in paragraph 6 of the companynter affidavit filed on behalf of the State, we find the following statements The companytentions of the petitioner in para. 14 of his affidavit are without substance. The scheme as approved by the Government is neither illegal number without jurisdiction. In sub-paragraph 3 of paragraph 6, it is alleged The allegations that the hearing and determination of the questions in issue are number in accordance with law or principles of judicial procedure, but only a farce gone through to satisfy the direction of the Supreme Court, is number companyrect. Sub-paragraph 7 of paragraph 6 reads The Minister in charge i.e., the Chief Minister can hear and decide. The State Government itself cannot be regarded as interested in the cause and therefore disqualified to decide. Sub-paragraph 8 of the said paragraph says The companytention that the Chief Minister is number companypetent, to give the hearing and companysider the objections inasmuch as he is biassed and has also prejudged the issue, is number well- founded. On facts on 9-12-1958, there was numberRoad Transport Department at all but a Road Transport Corporation, which is a companypletely autonomous body, with which the Chief Minister has numberconcern. Hence on the date of the enquiry, the Corporation being a companypletely autonomous body is an entirely independent body altogether and hence there can be numberquestion of bias to the Chief Minister hearing the objectors. The bearing given by the Chief Minister is just like a hearing of the companyrt of law after remand by a Superior Court The allegation that the Chief Minister had closed his mind and was biased is absolutely baseless. He kept an open mind and companysidered all the objections fully. The companynter-affidavit further gives in detail how the scheme was initiated by Guru Pershad and how the various steps were taken in companypliance with the provisions of the Act. It is therefore clear that the Government did number accept the allegations made by the appellants in their affidavits. Whatever may be the policy of the Government in the matter of nationalisation of the bus transport, it cannot be said that the Chief Minister initiated the scheme in question. The learned Counsel then relied upon certain extracts from the reports published in the newspapers purporting to be the speeches of the Chief Minister. Exhibit IV is said to be a summary of the speech of the Chief Minister. made on October 14, 1957, and the relevant portion thereof reads I do number have any prejudice against the Krishna District. The bus transport in Telangana was nationalised 25 years ago. The Bus Transport nationalisation was extended to Krishna District since it is companytiguous to Telangana in regard to transport services. It will be extended to the other districts gradually. It requires 12 crores of rupees to introduce nationalisation in all the districts at the same time. The Government is aware that Nationalisation of Bus Transport is number profitable. But we should fall in line with other States and move with the times. There are 360 buses in Krishna District. I cannot give an assurance that all these would be taken over. It is regrettable that these should be subjected to severe criticism when they are being done in public interest. This speech only reflects the policy of the Government. Exhibit V is said to be an extract from the report of the Indian Express dated October 18, 1957. The material part of it runs thus Nationalisation of road transport services in the Andhra area was a settled fact and there was absolutely numberquestion of going back on it This speech also only states the policy of the Government and has numberreference to Krishna District or to the transport services in that district. Exhibit VI is an extract from the report in the Hindu dated October 25, 1957, wherein it is alleged that the Chief Minister made the following statement Mr. N. Sanjiva Reddy, Chief Minister, said here today that the nationalised road transport in Krishna would be administered by a Corporation. The Chief Minister, who was addressing a press companyference said There is numberquestion of postponement of the decision to nationalise bus transport in that district The Chief Minister said firmly that there was numberpublic support to the companytention of the private bus operators that there should be numbernationalisation. This speech has a direct reference to the nationalisation of bus transport in Krishna District and indicates a firm determination on the part of the Chief Minister number to postpone it any further. Exhibit IX is an extract from the report in the Indian Express dated December 13, 1957 and it reads The Andhra Pradesh Chief Minister Sanjeeva Reddy told pressmen here to-day that the State Government would go ahead with the implementation of its decision to extend nationalisation of bus transport to Krishna district from April I next. This also indicates the Chief Ministers determination to implement the scheme of nationalisation of bus transport in Krishna District from a particular date. Exhibit X is a report in the Mail under date April 1, 1958, purporting to be a speech made by the Chief Minister in inaugurating the first phase of the extension of the nationalised road transport services to Guntur and Krishna Districts by the State Road Transport Corporation. Relevant extracts of the speech read thus He the Chief Minister companysidered the implementation of the scheme simple first, but he regretted to find it difficult since bus operators filed writ petitions in the High Court, raised a I huge numberse and fought till the very end against the scheme and finally even approached the Congress President Mr. U. N. Dhebar to save them Mr. Sanjeeva Reddi affirmed that the Government was determined to implement the scheme of nationalisation of bus transport services against all opposition and persons like him trained by the late T. Prakasam were never afraid of opposition. If it had been established that the Chief Minister made the speeches extracted in Exhibits VI, lX and X, there would have been companysiderable force in the argument of the learned Counsel for the appellants but numberattempt was made to prove that the Chief Minister did in fact make those speeches. It is true that the extracts from the newspapers were filed before the Chief Minister and they were received subject to proof but numberperson who heard the Chief Minister making those speeches filed an affidavit before him. The Chief Minister did number admit that he made the statements attributed to him. The Chief Minister in his order approving the scheme says As regards the paper cuttings, I may mention that in the companyrse of a long and varied, political career I have made hundreds of statements on many an occasion and many of them may be purely personal opinions. Moreover, it is number always that the press people companysult the persons on the accuracy of the statements made before they are published. The press cuttings filed before me are number companymuniques issued by the Government, with the approval of the Government. They are published records of several statements said to have been made by me on various occasions. It is companymon knowledge press cuttings here and there, torn out of companytext, will give a companypletely twisted picture and version of a mans real intentions. It is number possible for me to state any thing definite about the veracity of these statements said to have been made by me at different points of time. It is quite possible that I might have made many such, on many an occasion, and it is also quite possible, that some points spoken here and there may have been published with Head lines in the papers. It is number possible number desirable to treat paper cuttings of statements said to have been made on several occasions as legal evidence in a judicial enquiry. Notwithstanding the fact that the Chief Minister did number accept the companyrectness of the statements attributed to him in the newspapers, numberattempt was made by the appellants to file any affidavit in the High Court sworn to by persons who had attended the meetings addressed by the Chief Minister and heard him making the said statements. In the circumstances, it must be held that it has number been established by the appellants that the Chief Minister made the speeches indicating his closed mind on the subject of nationalisation of bus transport in Krishna District. If these newspaper cuttings are excluded from evidence, the factual basis for the appellants argument disappears. We, therefore, hold that the Chief Minister was number disqualified to hear the objections against the scheme of nationali- sation. A subsidiary argument is raised on the basis of r. 11 of the Andhra Pradesh Motor Vehicles Rules. It is companytended that the Road Transport Authority made an order rendering that the permits of the appellants ineffective without giving them due numberice as required by that rule and therefore the said order was invalid. Rule 11 of the said Rules reads In giving effect to the approved scheme, the Regional Transport Authority or Authorities companycerned shall, before eliminating the existing services or cancelling any existing permit or modifying the companyditions of the existing permit so as to - render the permit ineffective beyond a specified date reduce the number of vehicles authorised to be used under a permit or curtail the area or route companyered by the permit in so far as such permit relates to the numberified route give due numberice to the persons likely to be affected in the manner prescribed in these rules. This rule will have to be read along with s. 68-F, sub-s. 2, which reads For the purpose of giving effect to the approved scheme in respect of a numberified area or numberified route, the Regional Transport Authority may, by order,- a refuse to entertain any application for the renewal of any other permit b cancel any existing permit c modify the terms of any existing permit so as to- render the permit ineffective beyond a specified date reduce the number of vehicles authorised to be used under the permit curtail the area or route companyered by the permit in so far as such permit relates to the numberified area or numberified route. A companybined reading of s. 68F 2 and r. 11 makes it clear that the order companytemplated under the said subsection can be made by the Regional Transport Authority only after giving due numberice to the persons likely to be affected by the said order. On December 24, 1958, the Regional Transport Authority made the following order The permits of the following buses are rendered ineffective beyond 24-12-1958, under section 68F 2 c 1 of Motor Vehicles Act, 1939 as amended by Act 100 of 1956 for the purpose of giving effect to the approved scheme of Nationalisation in respect of the following numberified routes. The routes on which the appellants were operating their buses were also included in the routes mentioned in the order. On December 24, 1958, the Regional Transport Authority issued an order to the operators directing them to stop plying their buses on their respective routes from December 25, 1958, and that order was served on the appellants on the same day i.e., December 24, 1958. Though the learned Advocate-General suggested that the provisions of r. 11 have been satisfied in the present case, we find it impossible to accede to his companytention. There are two defects in the procedure. followed by the Regional Transport Authority i while the rule enjoins on the Authority to issue numberice to the persons affected before making the relevant order, the Authority made the order and companymunicated the same to the persons affected and ii while the rule requires due numberice i.e., reasonable numberice., to be given to the persons affected to enable them to make representations against the order proposed to be passed, the Regional Transport Authority gave them only a day for companyplying with that order, which in the circumstances companyld number be companysidered to be due numberice within the meaning of the rule. We have, therefore, numberhesitation to hold that the Regional Transport Authority did number strictly companyply with the provisions of the rule. But, in view of the supervening circumstances, the High Court, while numbericing this defect in the procedure followed by the Regional Transport Authority, refused to exercise its jurisdiction under Art. 226 of the Constitution. Pursuant to the order of the Regional Transport. Authority the appellants withdrew their vehicles from the companycerned routes and the vehicles of the Road Transport Corporation have been plying on those routes. The judgment of this Court companyclusively decided all the questions raised in favour of the respondents, and if the order of the Regional Transport Authority was set aside and the appellants were given another opportunity to make their representations to that Authority, it would be, as the High Court says, only an empty formality. As their vehicles have already been withdrawn from the routes and replaced by the vehicles of the Corporation, the effect of any such order would number only be of any help to the appellant but would introduce unnecessary companyplication and avoidable companyfusion. In the circumstances, it appears to us that as the appellants have failed all along the line, to interfere on a technical point of numberpractical utility is to strain at a gnat after swallowing a camel . We cannot, therefore, say that the High Court did number rightly exercise its discretion in this matter.

Case appeal was rejected by the Supreme Court

Sarkar, J. The appellant is a medical doctor and at the material time, he was the Civil Surgeon of Dibrugarh. He was a witness in a criminal case being G. P. Case No. 654/54 in which three persons were charged inter alia under s. 376 of the Indian Penal Code with the offence of rape. The case was tried with the aid of a jury and resulted in a verdict of acquittal in respect of that charge. There was an appeal to the High Court of Assam against the acquittal which was allowed and two of the accused persons were companyvicted. The offence was said to have been companymitted on a minor girl named Roheswari Chetia sometime in the afternoon of March 19, 1954. The same day at 6 p.m., she was examined by Dr. Dhanbir Pait, the doctor in charge of Moran Dispensary, near which the offence was alleged to have been companymitted. It appears that the police produced her for another medical examination at the District town of Dibrugarh the next day and she was then examined by Dr. Mahibulla who was an assistant to the appellant, the Civil Surgeon. Thereafter, the policy on March 21, 1954, produced the girl before the appellant for a further medical examination and she was examined by him on that date. With the reasons for these repeated medical examination we are number companycerned in this case. Doctor Pait was called as prosecution witness at the hearing of the case while the appellant and Dr. Mahibulla were called by the accused as defence witnesses. Dr. Pait in his evidence was clear that the girl had been raped. He said that he found two circular teeth marks on her cheeks and a reddish circular mark on her left breast. He also said that he found the hymen ruptured and gave other details in support of his opinion that girl had been ravished. In his opinion, the hymen appeared to have been ruptured the same day that he examined the girl. Dr. Mahibullas evidence was that the hymen was ruptured but the rupture had taken place nine or ten days before the incident and was number a recent one. The appellant in his evidence stated that the marks on the cheeks of the girl appeared to be insect bite and that hymen was number ruptured. He found numberevidence of rape on her person. There was thus direct companytradiction between the evidence of the doctor called by the prosecution and the doctors called by the defence, on the question of the rupture of the hymen. As we have earlier stated, the High Court allowed the appeal against acquittal in the view that the companymission of the offence of rape had been established by the evidence of the doctor called by the prosecution and other evidence led by it. It is number necessary to refer for the purposes of this appeal to the other evidence produced. The appeal to the High Court was heard by Sarjoo Prosad, C.J., and Deka, J. After allowing the appeal and companyvicting the two accused, these learned Judges on the same day, passed on order in the terms set out below, directing the issue of a numberice to the appellant. 5. 31-7-1958. Issue numberice on Dr. B. K. Pal Chaudhury D.W. 2 , Retired Civil Surgeon, Dibrugarh to show cause why he should number be prosecuted under s. 193 I.P.C. for giving false evidence in companynection with G.P. Case No. 654/54, Lakhimpur, Case No. 72 of 1955 - The State v. Mahendra Nath Barua and Others. The numberice was thereafter duly issued and served on the appellant. Pursuant to the numberice the appellant showed cause, but this time the matter was heard by Deka and Mahrotra JJ. These learned Judges came to the companyclusion that it was a fit case in which a companyplaint should be made against the appellant for an offence punishable under s. 193 of the Indian Penal Code and directed and Registrar of the High Court to lodge the companypliant in the Court of the Deputy Commissioner, Lakhimpur. It is against this order directing the making of the companypliant, that the present appeal was filed. Sections 476 to 479A of the Code of Criminal Procedure deal with companyplaints to be made for the offence of giving false evidence as defined by s. 193 of the Indian Penal Code and for other offences mentioned therein. Section 479A was introduced into the Code of Criminal Procedure by the Code of Criminal Procedure Amendment Act, 1955. Sub-section 6 of this section is in these terms S. 479A 6 - No proceedings shall be taken under sections 476 to 479 inclusive for the prosecution of a person for giving or fabricating false evidence, if in respect of such a person proceedings may be taken under this section. Now, the present case was one in which the proceedings were directed to be taken for giving false evidence and the learned Advocates, appearing for the parties to this appeal, agreed that sub-section 6 of s. 479A makes ss. 476 to 479 inapplicable to it. In that view of the matter, we think it unnecessary to companysider these sections. Section 479A 1 , so far as it is material to the present case, is in these terms When any . . . Criminal Court is of opinion that any person appearing before it as a witness has intentionally given false evidence in any stage of the judicial proceedings . . . and that, for the eradication of the evils of perjury . . . and in the interests of justice, it is expedient that such witness should be prosecuted for the offence which appears to have been companymitted by him, the Court shall, at the time of the delivery of the judgment or final order disposing of such proceeding, record a finding to that effect stating its reason therefore and may, if it so thinks fit, after giving the witness an opportunity of beaning heard, make a companyplaint thereof. Sub-section 5 of this section runs as follows In any case, where an appeal has been preferred from any decision of a Civil, Revenue or Criminal Court but numbercomplaint has been made under sub-section 1 , the power companyferred on such Civil, Revenue or Criminal Court under the said sub-section may be exercised by the Appellate Court and where the Appellate Court makes such companyplaint, the provisions of sub-section 1 shall apply accordingly, but numbersuch order shall be made, without giving the person affected thereby an opportunity of being heard. The appellants companytention is that the terms of this section were number companyplied with. We think that this companytention is justified. The present case is governed by sub-section 5 of s. 479A for here the companyplaint was number made by the trial Court but by the Appellate Court. Therefore, the terms of both sub-ss. 1 and 5 have to be companyplied with. The companybined effect of these sub-sections is to require the companyrt intending to make a companyplaint, to record a finding that in its opinion a person appearing as a witness has intentionally given false evidence and that for the eradication of the evils of perjury, and in the interests of justice, it is expedient that such witness should be prosecuted for the offence and to give the witness proposed to be proceeded against, an opportunity of being heard as to whether a companyplaint should be made or number. It seems to us that numbere of these companyditions of the section was observed by the High Court when it directed the companyplaint to be made. First there was numberfinding recorded by it that the appellant had intentionally given any false evidence or that it was expedient to proceed against him for the eradication of the evils of perjury and in the interest of justice. The order which directed the numberice to issue - and that seems to be the only order in companynection with the matter - does number record any such finding. Nor do we find in the judgment in the main appeal heard by the High Court in the case in which the appellant gave evidence, any such finding. Secondly, it does number seem to us that the High Court gave the appellant a proper hearing to which he was clearly entitled under the terms of sub-section 5 of s. 479A. Deka, J., in the judgment that he delivered, directing the companyplaint to be made, companytended himself by saying that the procedure laid down by s. 479A of the Criminal Procedure Code had been substantially followed except that in order to avoid prejudice to the appellant at the trial to follow the companypliant, the reasons for supposing the witness to have perjured had number been elaborately or specifically dealt with. It does number seem to us that this is a satisfactory way of dealing with the question raised. What Mehrotra, J., said, however, is, in our view, clearly erroneous. It appears to have been companytended by the learned Advocate for the appellant in the High Court that because the High Court had preferred to accept the testimony of the other doctors, it companyld number necessarily be said that the evidence of the appellant was false or that he intentionally gave false evidence and it was open to the companyrt on hearing the appellant to companye to a different companyclusion on these matters. Mehrotra, J., dealing with these companytentions said that these are matters which may be taken into companysideration by the Court trying the case but cannot be companysidered by this Court at this stage. Any observation by this Court on merits is likely to prejudice the trial of the case. He observed that s. 479A was inserted with the object of avoiding further inquiry which inquiry was required by s. 476. There are two further observations made by this learned Judge which are of great materiality in the present appeal and we set them out below The witness is in effect challenging the companyrectness of the findings of the Bench hearing an appeal that he intentionally made a false evidence. It is number open to this Bench to upset this finding. To my mind it is number open to the other Bench to record a finding different from the Bench hearing the appeal on the question of the witness intentionally giving a false evidence. It is obvious from these observations of Mehrotra, J., that he companysidered himself bound by the findings of the Bench hearing the appeal that the appellant had intentionally given false evidence. We have earlier stated that the Bench hearing the appeal expressed numbersuch finding. However that may be, it seems clear to us that the statute by providing in sub-section 5 of s. 479A, which is the provision governing this case, that numberorder directing a companyplaint shall be lodged without giving the person affected thereby an opportunity of being heard, intended that after giving that hearing it would be open to the Court to decide number to make a companyplaint. Otherwise there would be numbersense in directing that a hearing should be given. Now, the Court may, after giving that hearing, decide number to make a companypliant either for the reason that the Court was satisfied that numberfalse evidence was given by the witness companycerned or that such evidence was number intentionally false, or lastly, that it was number expedient in the interests of justice or to eradicate the evils of perjury, to make the companyplaint. By stating that it was number open to him to upset the finding of the Bench hearing the appeal that false evidence had been intentionally given, Mehrotra, J., really did number give any hearing to the appellant as the sub-section required him to do. He thought that the companyrse adopted by him would be in the best interest of the appellant as it would prevent his case from being prejudiced at the trial upon the companyplaint. We companysider that the ground of prejudice is more fancied than real. The finding required to be made by s. 479A 1 is only of a prima facie nature it cannot be a finding which would have any force at the trial upon the companypliant made pursuant to that finding. Further, this numberion of avoiding prejudice would number justify a clear breach of the terms of the section. The order of the High Court cannot be supported even if it is assumed that Deka, J., took a companyrect view of the matter, for, the other learned Judge clearly took a wrong view and it cannot be said what the decision would have been if he had approached the matter from the companyrect point of view. We are therefore satisfied that order appealed against had been made in breach of the express provisions of sub-secs. 1 and 5 of s. 479A, and cannot be allowed to stand. It was suggested by the learned Advocate for the respondent, the State of Assam, that we might go into the evidence and make a companyplaint ourselves. We do number companysider it fit to take this companyrse even if it be open to us, as to which we say numberhing, for we find it impossible to do so without going into the entire case and all the evidence led, and these are number before us. It was then said that we should remand the case back to the High Court for giving proper hearing to the appellant, but we do number think that we should make that order either. All that has happened is that the High Court has made the order in breach of the section and what we are called upon to do is to set aside that order. What further action can be taken in accordance with law is for the High Court to decide.

Case appeal was accepted by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeals Nos. 157 and 158 of 1957 and 5 of 1958. Appeals by special leave from the judgment and order dated October 31, 1955, of the Allahabad High Court, in Criminal Reference Nos. 28, 29 and 30 of 1955, arising out of the judgment and order dated December 18, 1954, of the Sessions Judge, Deoria, in Criminal Revisions Nos. 7, 8 and 9 of 1954. C. Mathur, C. P. Lal and G. N. Dikshit, for the appellant. S. Barlingay and A. G. Ratnaparkhi, for the respondents. 1959. December 15. The Judgment of the Court was delivered by SHAH J.-The question which falls to be determined in this group of appeals is whether field workers, i.e., Supervisors and Kamdars employed by a sugar factory to guide, supervise and companytrol the growth and supply of sugarcane for use in the, sugar factory are employees of a Commercial Establishment with in the meaning of the United Provinces Shop and Commercial Establishment Act, XXII of 1947 herein- after referred to as the Act . The Magistrate who tried the respondents for offences under s. 27 of the Act held that the field workers were employees of a Commercial Establishment. The High Court at Allahabad took a companytrary view, and the State of Uttar Pradesh has appealed to this companyrt against the order of the High Court with special leave under Art. 136 of the Constitution. The United Provinces Shop and Commercial Establishment Act, 1947 was enacted to regulate the hours of employment and certain other companyditions of employment in shops and companymercial establishments. Commercial Establishment is defined by s. 2, cl. 3 of the Act. By s. 12 of the Act, provision is made for giving to the employees a weekly holiday besides holidays which may be granted under s. 11. Section 13 provides for granting, ordinary, casual and sickness leave. Section 26 requires the employer to maintain such registers and records and to display such numberices as may be prescribed and s. 27 penalises companytraventions of the Act and the rules made thereunder. The Lakshmi Devi Sugar Mills Ltd. hereinafter referred to as the companypany owns a factory at Chhitauni for manufacturing sugar. The three respondents are respectively the General Manager, Assistant Manager and Secretary of the companypany. The companypany employs certain classes of field workers to guide, supervise and companytrol the growth and supply of sugarcane for use in the Factory. The Deputy Chief inspector of Shops and Commercial Establishment, Uttar Pradesh, filed three companyplaints against the respondents in the companyrt of the Judicial Magistrate, Deoria, charging them with companytravention of the provisions of ss. 12, 13 and 26 of the Act in respect of certain field workers employed by the companypany for - guiding, supervising and companytrolling the growth and supply of sugarcane. The respondents companytended that the Act did number apply to those employees as they were workers within the meaning of the Factories Act and accordingly exempt from the operation of the Act. The Judicial Magistrate rejected the companytention and companyvicted the respondents of companytravention of s. 26 of the Act and sentenced each of them to pay a fine of Rs. 30 in each of the three cases. Against the orders of companyviction and sentence, the respondents preferred revision applications to the Court of Session at Deoria. The Sessions Judge disagreed with the view of the Trial Magistrate and referred the cases to the High Court at Allahabad recommending that the orders of companyviction and sentence passed by the Trial Magistrate be set aside. The High Court accepted the references and ordered that the respondents be acquitted. By the definition of a Commercial Establishment in s. 2 cl. 3 of the Act, the clerical and other establishments of a factory to whom the provisions of the Factories Act, 1934, do number apply, are included in the companynotation of that expression. It is true that the reference in the definition by which clerical and other establishments of factories are included is to the Factories Act of 1934, but by virtue of s. 8 of the General Clauses Act X of 1897, it must be companystrued as a reference to the provisions of the Factories Act LXIII of 1948 which repealed the Factories Act of 1934 and re-enacted it. The companytention raised by the State by special leave, that since the repeal of the Factories Act, 1934, in the definition of Commercial Establishment in s. 2 cl. 3, are included all clerical and other establishments of a factory without any exemption has therefore numberforce. The Factories Act, 1948 defines a worker by s. 2 1 as meaning, it a person employed, directly or through any a person employed, directly or thought any agency, whether for wages or number, in any manufacturing process or in cleaning any part of the machinery or premises used for a manufacturing process, or in any other kind of work incidental to, or companynected with, the manufacturing process, or the subject of the manufacturing process. and a factory is defined by s. 2 m as meaning any premises including the precints thereof wherein a specified number of workers on any day of the preceding twelve months is employed. By the companybined operation of these definitions, persons employed in any manufacturing process or in cleaning any part of the machinery or part of the premises used for the manufacturing process or any other kind of work incidental to or companynected with the manufacturing process or the subject of the manufacturing process are deemed to be workers in a factory. By the use in s. 2 1 of the Factories Act of the expression, I employed in any other kind of work incidental to or companynected with the subject of manufacturing process, number only workers directly companynected in the manufacturing process, but those who are companynected with the subject of manufacturing process in a factory are included. It is unnecessary for the purpose of this case to decide the precise meaning of the expression I subject of the manufacturing process in s. 2 cl. 1 , because the diverse provisions of the Factories Act are intended to benefit only workers employed in a factory, i.e., in the precincts or premises of a factory. It is difficult to hold that field workers who are employed in guiding, supervising and companytrolling the growth and supply of sugarcane to be used in the factory are employed either in the precincts of the factory or in the premises of the factory and if these workers are number employed in a factory, the-provisions of the Factories Act, 1948 do number apply to them and they evidently fall within the definition of Commercial Establishment. The High Court was of the view that the Supervisors and Kamdars companynected with the subject of manufacturing process, namely sugarcane, were workers within the meaning of the Factories Act and accordingly they were excluded from the definition of Commercial Establishment under the Act. However, even if the Supervisors and Kamdars were employed in any other kind of work companynected with the subject of manufacturing process , unless they were employed in the factory, the provisions of the Factories Act do number apply to them, there is numberdispute that they are employees of a Commercial Establishment within the meaning of the Act. The High Court was therefore in error in acquitting the respondents of the offences of which they were companyvicted by the Trial Magistrate. The orders of acquittal passed by the High Court are set aside and the orders of companyviction and sentence passed by the Trial Magistrate are restored.

Case appeal was accepted by the Supreme Court

Das, C.J. The appellant is a public limited companypany registered under the . It is a lessee of four cinema houses situate within the municipal limits of Poona City known respectively as Minerva, The Globe, Sri Krishna and The Nishat. It exhibits cinematograph films, both foreign and Indian, in the said four houses. The respondent, a body companyporate, was governed by the Bombay District Municipal Act, 1901 Bom. III of 1901 up to June 8, 1926, and from then by the Bombay Municipal Boroughs Act, 1925 Bom. XVIII of 1925 up to December 29, 1949, and, thereafter, by the Bombay Provincial Municipal Corporation Act, 1949 Bom. LIX of 1949 . With effect from October 1, 1920, the respondent, with the sanction of the Government of Bombay levied on the owners and lessees of cinema houses within the limits of the erstwhile province of Bombay a tax of Rs. 2 per day as license fee. Rules for the levy and companylection of the said tax were framed by the respondent. Those rules were amended on or about June 3, 1941, enhancing the tax from Rs. 2 per day to Rs. 1 per show. The rules were again revised on or about June 9, 1948, under which the tax was enhanced from Rs. 1 per show to Rs. 5 per show. At all material times the tax was being companylected at the last mentioned rate. Section 59 of the Bombay District Municipal Act 1901 provided that subject to any general or special orders which the State Government might make in that behalf any Municipality a after observing the preliminary procedure required by s. 60, and b with the sanction of the authority therein mentioned, might impose for the purposes of that Act any of the taxes mentioned in that section. After enumerating ten specific heads of taxes, which a municipality companyld levy, a residuary category was set forth in clause xi in the words following - Any other tax to the nature and object of which the approval of the Governor in Council shall have been obtained prior to the selection companytemplated in sub-clause i of clause a of section 60. Every since the appellant became a lessee of the said cinema houses, the appellant has been making payments of the said tax under protest. After giving the necessary statutory numberice to the respondent, the appellant, on or about March 31, 1950, filed a suit in the Court of the Civil Judge, Senior Division, Poona, being Suit No. 76 of 1950, against the respondent for a declaration that the levy and imposition of the said tax with effect from October 1, 1920, were invalid and illegal that the enhancement in the rates of the tax with effect first from June 3, 1941, and then June 9, 1948, was invalid and illegal and that the resolutions passed and rules framed in companynection with the levy, imposition, enhancement and companylection of the said impugned tax were invalid, illegal and ultra vires, for a permanent injunction restraining the defendants from levying or recovering and or increasing and enhancing the said tax and for refund to the appellant of the amounts of the tax companylection from it and for companyts of the suit and interest. By its judgment dated November 30, 1951, the trial companyrt held that the said tax was validly levied and imposed, but that the increase and enhancement thereof in 1941 and 1948 were illegal and ultra vires and that the suit was number barred under the Acts governing the respondent. The trial companyrt decreed the suit in part by issuing an injunction restraining the respondent from levying, recovering or companylecting the tax at the enhanced rate and passing a decree against the respondent for refund of a sum of Rs. 27,072 with interest and companyts. The respondent preferred an appeal and the appellant filed cross objections. But the High Court by its judgment and decree dated February 10, 1953, reversed the judgment of the trial companyrt and dismissed the suit of the appellant with companyts throughout. The appellants cross objections were also dismissed. On December 10, 1953, the High Court from granted leave to the appellant to appeal to this Court from the said judgment. Hence this final appeal questioning the validity of the impugned tax. The first point urged in this appeal is that the law imposing this tax is number companyered by entry 50 in List II of the Seventh Schedule to the Government of India Act, 1935, but is really a tax on the appellants trade or calling referred to in entry 46 and that, therefore, the amount of tax cannot under s. 142-A of the Government of India Act, 1935 exceed Rs. 100 per annum. This point need number detain us long, for it is companyered by us in the appellants other appeal No. 145 of 1955. The second point urged before us in support of this appeal is that s. 59 1 xi is unconstitutional in that the legislature had companypletely abdicated its functions and had delegated essential legislature power to the Municipality to determine the nature of the tax to be imposed on the rate payers. Learned companynsel for the appellant urges that the power thus delegated to the municipality is unguided, uncanalised and vagrant, for there is numberhing in the Act to prevent the municipality from imposing any tax it likes, even, say, income-tax. Such omnibus delegation, he companytends, cannot on the authorities be supported as companystitutional. We find ourselves in agreement with the High Court in rejecting this companytention. In the first place, the power of the municipality cannot exceed the power of the provincial legislature itself and the municipality cannot impose any tax, e.g., income tax which the provincial legislature companyld number itself impose. In the next place, s. 59 authorises the municipality to impose the taxes therein mentioned for the purposes of this Act. The obligations and functions cast upon the municipalities are set forth in ch. VII of the Act. Taxes, therefore, can be levied by the municipality only for implementing those purposes and for numberother purpose. In other words it will be open to the municipality to levy a tax for giving any of the amenities therein mentioned. The matter may be illustrated by reference to s. 54 which enumerates the duties of municipalities. The first duty mentioned in that section is that the Municipality should make provision for lighting public streets and numberody can object if it imposes a lighting tax, which, indeed, is item ix in s. 59 1 . Take another example It is the duty of the Municipality to arrange for supply of drinking water and it may legitimately charge a water rate which, again, is item viii in s. 59 1 . We do number for a moment suggest that the municipalities may only impose a tax directly in companynection with the heads of duties cast upon it. What we say is that the tax to be imposed must have some reasonable relation to the duties cast on it by the Act. In the third place, although the rule of companystruction based on the principle of ejusdem generis cannot be invoked in this case, for items i to x do number, strictly speaking, belong to the same genus, but they do indicate, to our mind the kind and nature of tax which the municipalities are authorised to impose. Finally, the provincial legislature had certainly number abdicated in favour of the municipality, for the taxing power of the municipality was quite definitely made subject to the approval of the Governor-in-Council. Under the Indian Council Act, 1861 24 and 25 Vic. c. 67 the Governor-in-Council might mean the Governor in Executive Council or the Governor in Legislative Council. If the reference in s. 59 1 xi is to the Governors Legislative Council, then there was numberimproper delegation at all, for it was subject to the legislative companytrol of the Governor in Legislative Council. The Governors Legislative Council was companyposed of all the members of the Governors Executive Council besides a few other persons. Therefore if the reference was to the Governor in his Executive Council even then, from a practical point of view, the ultimate companytrol was left with the Governors Legislative Council. We need number labour this point any further, for on the first three grounds the delegation of legislative authority, if any, is number excessive so as to make the exercise of it unconstitutional. In our opinion the impugned section did lay down a principle and fix a standard which the municipalities had to follow in imposing a tax and the legislature cannot, in the circumstances, be said to have had abdicated itself and, therefore, the delegation of power to impose any other tax cannot be struck down as being in excess of the permissible limits of delegation of legislative functions. The last point urged by learned companynsel for the appellant is that, under clause xi of s. 59 1 , the enhancements of the rates of the tax in 1941 and again in 1948 were illegal in that the municipality had numberpower to do so under the Bombay Municipal Boroughs Act, 1925. According to learned companynsel for the appellant the judgment under appeal upholding the validity of such enhancements cannot be supported under s. 60 of that Act. That section runs as follows - Power to 60 1 Subject to the requirements of clause a of suspend, reduce the proviso to section 58 a municipality may, except or abolish any as otherwise provided in clause b of the proviso existing tax to section 103 at any time for any sufficient reason, suspend, modify or abolish any existing tax by suspending, altering or rescinding any rule prescribing such tax. The provisions of Chapter VII relating to the imposition of taxes shall apply so far as may be to the suspension, modification or abolition of any tax and to the suspension, alteration or rescission of any rule prescribing a tax. Reference is made to the marginal numbere where the words used are power to suspend, reduce or abolish any existing tax. It is suggested that the word modify in the body of the section in between the words suspend and abolish should be companystrued in the sense of reduction. The marginal numbere, according to him, shows that the several words were used in the section to indicate a progressive diminution in the quantum of tax until it was companypletely gone. Reference is made to the root meaning of the word modify which is to reduce or make less but does number companyer the idea of enhancement. In the first place, the marginal numbere cannot affect the companystruction of the language used in the body of the section if it is otherwise clear and unambiguous see Commissioner of Income Tax, Bombay v. Ahmedbhai Umarbhai and Co., Bombay 1950 S.C.R. 335 at p. 353. . In the next place, it should be borne in mind that s. 67 of the Bombay District Municipal Act Bom. III of 1901 which was formerly applicable to municipalities used the word reduce in between the words suspend and abolish and that that section had been reproduced is s. 60 of the Bombay Municipal Boroughs Act, 1925, but that in the process of such reproduction the word reduce was dropped and the word modify was introduced. In the marginal numbere, however, the word reduce was number substituted by the word modify, apparently through inadvertence. If the word modify is to be read as reduce, then there companyld be numberpoint in the provincial legislature substituting the word reduce by the word modify. This change must have been made with some purpose and the purpose companyld only have been to use an expression of wider companynotation so as to include number only reduction but also other kinds of alteration. Section 76 of this very Act also refers to modification number involving an increase in the amount to be imposed which makes the sense in which the word modify has been used in this Act perfectly clear, namely, that there may be a modification involving an increase. Reference may also be made to the decision of the Court of Appeal in England in the case of Stevens v. The General Steam Navigation Company, Ltd. L.R. 1903 1 K.B. 890. . Modification, according to Collins M.R. in his judgment at p. 893, implied an alteration and the word was equally applicable whether the effect of the alteration was to narrow or to enlarge the provisions. In our opinion the dropping of the word reduce and the introduction of the word modify in the body of s. 60 of the Act under companysideration clearly indicate an intention on the part of legislature to widen the scope of this section and the High Court was right in so companystruing the same.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION CIVIL Appeal No. 298 of 1955. Appeal from the judgment and order dated April 28, 1953, of the Patna High Court in Appeal from Original Order No. 90 of 1949, arising out of the judgment and order dated January 25, 1949, of the Sub-Judge, Purnea, in Misc. Case No. 54 of 1947. Sir lqbal Ahmad, S. N. Andley, J. B. Dadachanji and Rameshwar Nath, for the appellant. C. Setalvad, Attorney-General for India and R. C. Prasad, for the respondent. 1959. March 16. The Judgment of the Court was delivered by SARKAR, J.-This appeal arises out of a proceeding in execution of an adjudication made under the provisions of the United Provinces Encumbered Estates Act, 1934 U. P. XXV of 1934 , an Act passed by the legislature of the United Provinces, number called the Uttar Pradesh. The questions that arise in this appeal largely turn on the provisions of that Act and they have therefore to be referred to. The Act was intended to give relief to the proprietors of certain landed properties in the United Provinces. Section 4 of the Act enabled a proprietor of such landed properties to make an application in writing to the Collector of the District in which any of his lands is situate, stating the amount of his debts and asking for the application of the Act to him. Upon such an application being made, the Collector is to make an order under s. 6 forwarding it to a Special Judge appointed under the Act who, under s. 3 is any civil judicial officer appointed for a local area, to exercise the powers companyferred and to perform the duties imposed, by the Act. Section 7 of the Act provides that upon the making of an order by the Collector under s. 6, subject to certain exceptions which it is number necessary to enumerate, all proceedings pending in the companyrts in the United Provinces in respect of a debt due by the applicant shall be stayed and all execution processes issued against him by such companyrts shall become null and void and numberfresh process in execution shall be issued against him, number any fresh suit or other proceeding instituted. The Special Judge after he has received the application sent to him by the Collector is required by s. 8 to call upon the applicant to submit a written statement verified in the manner of a plaint, setting out full particulars of his debts, the names and addresses of his creditors and the nature and extent of his proprietary rights in land as also of all his properties which are liable to attachment under s. 60 of the Code of Civil Procedure. Under s. 9 the Special Judge has then to publish a numberice calling upon persons having claims against the applicant to submit the same within a time specified. Section 10 states that the claimant shall give full particulars of his claim and of the applicants properties. Section 11 provides that the Special Judge will publish a further numberice specifying the properties mentioned by the applicant as belonging to him and any person wishing to make a claim to any such property has to do so within a certain period. The same section gives power to the Special Judge to decide the claims made to the properties and provides that the decision made by him is to be deemed to be a decree of a civil companyrt of companypetent jurisdiction. Section 14 lays down that the Special Judge will inquire into the claims submitted by the creditors against the applicant and decide the questions in issue on the same principles as those on which a companyrt of law would have decided them, but he has the power to reduce the interest due and to give relief to the applicant in respect of such claims under certain specified United Provinces Acts. Sub- section 7 of s. 14 provides that if upon enquiry the Special Judge finds that any amount is due to any claimant he shall pass a simple money decree for such amount together with companyts and interest and such decree shall be deemed to be a decree of a civil companyrt of companypetent jurisdiction but it shall number be executable within the United Provinces except under the provisions of the Act. The next section to be referred to is s. 19 which requires the Special Judge to send the decrees granted under s. 14 7 to the Collector for execution in accordance with the provisions of Chapter V of the Act and to inform him of the nature and extent of the property which he has found to be liable to satisfy the debts of the applicant. Then companye the provisions as to execution companytained in Chapter V. The sections in this Chapter provide that the Collector will himself and without being required to be moved for the purpose by any person, proceed to execute the decree against the properties of the applicant within the United Provinces by the various methods indicated, and for realising the value of the applicants properties the Col- lector shall have all the powers of a civil companyrt for the execution of a decree. With regard to the properties of the applicant outside the United Provinces, the Act companyld number provide for execution. To companyer such cases it was enacted by s. 24 3 that for the purpose of execution against property outside the United Provinces the decrees passed by the Special Judge would be deemed to be decrees in favour of the Collector. These are all the provisions of the Act that need be referred to for the purposes of this case. The facts may number be stated. The respondent was the proprietor of landed properties in the United Provinces and was entitled to claim relief under the Act. He became heavily encumbered in debts. It is number necessary to go into his financial embarrassment in great detail and it will be enough to say that in 1926 and 1927 he had created several mortgages on his properties in favour of the Allahabad Bank, the Banaras Bank and a person called Kalia, for very large sums. In 1929, the Banaras Bank filed a suit against the respondent in the Court of the Additional Sub-Judge, Banaras, in the United Provinces for enforcement of its mortgage making the other creditors of the respondent named above parties to the suit. A decree was passed in that suit giving the creditors priority in a certain order. The Allahabad Bank number being satisfied with that order of priority, filed an appeal in the High Court at Allahabad which was decided in its favour. While the appeal was pending, the respondent applied to the Collector of Banares for relief under the Act. The procedure laid down in the Act as earlier summarised was duly followed and on March 21, 1940, the Special fudge of Banares to whom the application had been forwarded by the Collector, passed three money decrees in favour of the three creditors of the respondent mentioned above in a certain order of priority with which we shall number be companycerned in this case. The total amount of such decrees came nearly to rupees nine lacs. He then sent the decrees to the Collector of Banaras for execution as required by the Act. The execution of the decrees was thereafter companymenced by the Additional Collector, Banaras under the provisions of the Act against the properties in the United Provinces. The respondent owns an estate in the district of Purnea in Bihar, called the Semapur estate. Under s. 24 3 of the Act earlier mentioned, the decrees passed by the Special Judge are to be deemed to be decrees in favour of the Collector for the purpose of execution against the Semapur estate. The Additional Collector, Banaras, applied to the Additional Civil Judge, Banaras, for transmission of the said decrees to the Court of the Subordinate Judge, Purnea for execution and an order for transmission of the decrees to the Court at Purnea was accordingly made by that Judge on January 4, 1947. Thereafter on March 17, 1947, the Additional Collector, Banaras, applied to the Subordinate Judge, Purnea, as the transferee Court to execute the decrees by attachment and sale of the Semapur estate. The Subordinate Judge thereupon made an order directing execution to issue as sought. The respondent preferred an appeal to the High Court at Patna from this order of the Subordinate Judge, Purnea and his appeal was allowed with the result that the execution of the decrees against the Semapur estate failed. The present appeal is by the Additional Collector, Banaras against the order of the High Court. The first question that arises in this appeal is whether the Subordinate Judge, Purnea, bad jurisdiction to order execution of the decree transferred to him. The High Court held that he did number have that jurisdiction. The matter was put in this way. The decree was number a decree under the Code of Civil Procedure. It was only to be deemed as such because of s. 14 7 of the Act. The Act -was an Act of the United Provinces legislature which companyld number pass a legislation having effect outside the United Provinces. The operation of s. 14 7 of the Act had therefore to be companyfined within the borders of the United Provinces. The Subordinate Judge, Purnea companyld number apply that section in Bihar and treat the decree as a decree under the Code. If he companyld number do so he companyld number order execution of the decree. If he were permitted so to apply the Act, then an Act of the legislature of the United Provinces would be indirectly affecting property outside the United Provinces which it companyld number directly do. The Act companyld be applied in Bihar only by giving it an extra- territorial operation. This the law did number allow. So the decree companyld number be executed in Purnea. We think that this argument is fallacious. No question of any extra-territorial application of the United Provinces Act either directly or indirectly, arises in this case. It is clear that by virtue of s. 14 7 of the Act, a decree of the Special Judge under the Act is within the United Provinces, a decree for all purposes of the Code. It companyld therefore be transferred decree under s. 39 of the Code of Civil Procedure to a companyrt outside the United Provinces, for execution. Now when a decree is transferred, it is the duty of the transferee companyrt to execute it by all methods provided by the Code of Civil Procedure. But it is said that the transferee companyrt must be satisfied that it is a decree under the Code of Civil Procedure before it can order execution under that Code. How then is the transferee companyrt to decide that ? It has before it a decree passed number by itself but by another ,court. It has therefore to satisfy itself that the decree was one which, for that companyrt, was a decree passed under the Code. In order to do that it is asked to apply the United Provinces Act to the decree passed within the United Provinces. How can it be said that if it so applies the United Provinces Act it is giving it an extra-territorial operation ? It is doing numberhing of the kind. It is applying an Act of the United Provinces to something which happened within the territories of those Provinces it is applying an United Provinces Act to a matter within the companypetence of the legislature of the United Provinces to legislate upon. No doubt a companyrt outside the United Provinces is applying a statute of those Provinces, but that does number amount to giving extra- territorial operation to that statute. If the statute is being so applied to one of its legitimate objects, it is number being given any extra-territorial operation at all. We further find it difficult to appreciate how the application by the Subordinate Judge of Purnea of the United Provinces Act to the decree of the Special Judge, Banaras, sent to him for execution, results in the United Provinces Act affecting property outside the United Provinces. The only result of such application is to remove the objection that that decree is number a decree of a companyrt in the United Provinces passed under the Code the Act is number thereby made to affect property outside the United Provinces. Of companyrse, if that decree is a decree under the Code it can be executed against any property outside the United Provinces. That however is number the result of the United Provinces Act but of the Code of Civil Procedure which is a central legislation and applies to Bihar also. The High Court was therefore wrong in thinking that the Subordinate Judge, Purnea, had numberjurisdiction to execute the decree passed under the Act within the United Provinces and sent to him for execution. It was then companytended that the order of transfer of the decree was invalid because under s. 39 of the Code such an order companyld be made only on the application of the decree- holder and in the present case it had number been made on his application. His point was this. Under s. 24 3 of the Act, a decree of the Special Judge is to be deemed to be a decree in favour of the Collector for the purpose of execution against property outside the United Provinces. Therefore, in the present case it was the Collector, Banaras, who was the decree holder and he alone companyld apply for the transfer of the decree. Actually however the order for the transfer had been made in this case on the application of the Additional Collector, Banaras. So it was said the order was invalid. Now this argument depends upon the Collector and the Additional Collector being different persons. It is clear however that they are number. That appears from ss. 14 and 14A of the United Provinces Land Revenue Act, 1901, to which our attention was drawn. Section 14 gives power to the Government to appoint a Collector for discharging the duties mentioned in the Act or any other law for the time being in force. Section 14A 1 gives power to the Government to appoint an Additional Collector. Sub-section 3 of s. 14A provides that the Additional Collector shall exercise such powers and perform such duties of a Collector as the Government may direct. The Additional Collector therefore exercises such of the powers and discharges such of the functions of the Collector, as the Government directs him to do. We have before us a document companytaining such an order by which the work of sale and execution which under the Encumbered Estates Act had to be done by a Collector, had been entrusted to the Additional Collector. It follows that for the purposes of execution and sale under the Act, the Additional Collector is to be deemed to be the Collector as he exercises the latters powers in this regard. The Additional Collection was hence quite companypetent to apply for the transfer of the decree. The third point against the validity of the order of the learned Subordinate Judge was that under s. 39 of the Code the decree companyld be transferred only by the Court which passed it. It was said that in the present case it is only by virtue of s. 14 of the Act that the decision of the Special Judge is deemed to be a decree that since it was his decision, he must be deemed to have passed it. It was then pointed out that the order for the transfer of the decree had in fact been made by the Additional Civil Judge, Banaras, and number by the Special Judge, Banaras, and hence that order was of numbereffect. This is an argument with which we are number much impressed. It has been pointed out to us that the powers of a special Judge under the Act were companyferred on the Court of the Additional Subordinate Judge, Banaras, by the United Provinces Governments Revenue Department numberification No. 767-Rev. published in the United Provinces Gazette of the 12th October, 1935. The Additional Subordinate Judge later came to be called the Additional- Civil Judge. It is therefore the same companyrt which exercises the powers of an Additional Civil Judge as also those of a Special Judge under the Act. We find numberdifficulty in treating the order of transfer as having been made by the Special Judge. The fact that the order purported to be made by the Additional Civil Judge was a matter of mere irregularity and cannot make it invalid. Nor do we find any lack of power in the Special Judge to order a transfer of the I decrees. The Act provides that his adjudication would be treated as a decree of a civil companyrt of companypetent jurisdiction. The execution of such a decree outside the United Provinces is also clearly companytemplated by s. 24 3 . We have earlier held that such execution is permissible in law. That being so, in order to give effect to the provisions of the Act it has to be held that the Special Judge must be deemed to be a companyrt which passed the decree within the meaning of s. 39 of the Code of Civil Procedure. Nor does there seem to be any objection to think that the Special Judge is a civil companyrt. From the provisions of the Act earlier set out there is numberdoubt that he adjudicates upon rights of the parties and acts in the same way as any other civil companyrt would do. Indeed, apart from the fact that the proceedings before him do number companymence by the filing of a plaint, we find numberdistinction between him and a companyrt as ordinarily understood. The order of transfer of the decree is hence, in our view, clearly a good order. Lastly, it was said that the decree was barred by limitation long before the order for its transfer was made. It was companytended that art. 182 of the Limitation Act governed the case, and the application for its execution had been made beyond the time limited. The question is, does the article apply ? The High Court held that that article had numberapplication to the present case and that numberquestion of limitation arose for the execution proceeding in Purnea Court is merely a companytinuation of the execution proceeding pending before the Collector of Banares . In our opinion, the High Court was right in the view that it took. It is quite clear that if the application for execution with which we are companycerned was made in a pending execution proceeding, numberion of the application of art. 182 arises. It long been recognised by the companyrts in our companyntry that a right to companytinue a proceeding which is pending is a right which arises from day to day-and numberquestion of any bar of limitation with regard to the enforcement of such a right arises See Kedar Nath Dutt v. Harra Chand Dutt 1 Subba Chariar v. Muthuveeran Pillai 2 . The question then is, was the application for execution which has resulted in the order under appeal, one for companytinuing a pending execution proceeding ? It is number disputed that all along since the decree was sent by the Special Judge to the Collector for execution and before that date the decree was number executable it has companytinuously been in execution under the provisions of the Act by the Additional Collector, Banaras, and that such execution proceeding was pending on the date of the present application for execution. The question thus is, whether the execution proceeding started in the Court of the Subordinate Judge, Purnea, was a companytinuation of the execution proceeding by the Additional Collector, Banaras. We think it was. We have to remember that s. 14 7 of the Act which said that an adjudication of the special Judge was to be deemed to be a decree also provided that that decree would number be executable within the United Provinces except under the provisions of the Act. We have also to remember that the Act provided that as against the properties within the United Provinces the decree companyld only be executed by the Collector on his own by the various methods provided. We may also point out that s. 24 4 provides that for the purpose of such execution the Collector is to have all the powers of a civil companyrt for the execution of a decree. It is therefore clear that the only mode of execution of the decree within the United Provinces companytemplated by the Act is the execution by the Collector. Within the United Provinces the execution of the decree by the Collector would be deemed to be an execution under the Civil Procedure Code. The execution by the Collector is execution of what is a decree within the Code. When the decree is executed outside the United Provinces, where, as already stated, it can be legally 1 1882 I.L.R. 8 Cal, 420. 2 1912 I.L.R. 36 Mad. 553. executed, the amount realised by the execution by the Collector has to be- taken into account. When the Subordinate Judge, Purnea, has to decide the question , whether the application for execution made to him is in companytinuance of an existing execution proceeding, he has to recognise the proceeding before the Additional Collector, Banares, as a proceeding in execution under the Code for it is so under the Act. In doing this, for the reasons earlier mentioned, he would number be giving any extra-territorial operation to the Act. It seems to us therefore that the execution of the decree by the Collector must be deemed to be execution of a decree for all purposes and therefore an application made to the Subordinate Judge, Purnea, for execution of the same decree while an execution proceeding was pending before the Collector, must be a companytinuation of the execution last mentioned. No question of limitation can arise in regard to such an application. We think therefore that this appeal must succeed. We set aside the order of the High Court and restore the order of the Subordinate Judge, Purnea.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 343 of 1955. Appeal from the judgment and order dated September 13, 1954, of the Patna High Court in Misc. Judl. Case No. 39 of 1954. K. Jha, B. K. P. Sinha and R. C. Prasad, for the appellant. Mahabir Prasad, Advocate-General for the State of Bihar, Ishwari Nandan Prasad and S. P. Varma, for the respondents. 1959. April 1,5. The Judgment of the Court was delivered by K. DAS, J.-This appeal on a certificate granted by the High Court of Patna is from a judgment of the said High Court dated September 13, 1954, in a writ proceeding numbered as Miscellaneous Judicial Case No. 39 of 1954 in that companyrt, which the appellant had instituted on an application made under Art. 226 of the Constitution in the circumstances stated below. It was alleged that one Mahatma Mast Ram Hindu saint, owned and possessed companysiderable properties in the district of Monghyr in the State of Bihar. About two hundred years ago, he built a small temple at Salouna in which he installed a deity called Sri Thakur Lakshmi Narainji. This temple came to be known as the Salouna asthal. Mast Ramji died near about the year 1802. He was succeeded in turn by some of his disciples, one of whom was Mahant Lakshmi Dasji. He built a new temple in 1916 into which he removed the deity from the old temple and installed two new deities, Sri Ram and Sita. in 1919 Mahant Lakshmi Dasji died. He left three disciples, Vishnu Das, Bhagwat Das and Rameshwar Das. A dispute arose among these disciples about succession to the gaddi, which was settled sometime in February 1919. By that settlement it was arranged that Vishnu Das would succeed Mahant Lakshmi Das as the shebait and would be succeeded by Bhagwat Das, and thereafter the ablest bairagi of the asthal, born of Brahmin parents, would be eligible for appointment as shebait. Bhagwat Das died sometime in 1935 and again a dispute arose between one Rameshwar Das, the youngest chela of Mahant Lakshmi Das, and Ram Saroop Das who is the present Mahant and appellant before us. Rameshwar Das, it appears, filed an application under the Charitable and Religious Trusts Act XIV of 1920 for a direction upon Mahant Ram Saroop Das to render an account of the usufruct of the asthal. This application was companytested by Mahant Ram Saroop Das, who said that the properties appertaining to the Salouna asthal did number companystitute a public trust within the meaning of the provisions of the Charitable and Religious Trusts Act XIV of 1920 and therefore he was number accountable to any person. Mahant Ram Saroop Das also applied for and obtained permission under s. 5 of the aforesaid Act to institute a suit for a declaration that the Salouna asthal and the properties thereof did number companystitute a public trust. Such a suit was brought in the companyrt of the Subordinate Judge of Monghyr who, however, dismissed the suit. Then, there was an appeal to the High Court of Patna and by the judgment and decree passed in First Appeal No. 10 of 1941 dated March 5, 1943, the High Court gave a declaration to the effect that the Salouna asthal and the properties appertaining thereto did number companystitute a public trust within the meaning of the provisions of the Charitable and Religious Trusts Act, XIV of 1920 . Some eight years later, the Bihar Hindu Religious Trust Act, 1950 Bihar I of 1951 , hereinafter referred to as the Act, was passed by the Bihar Legislature and received the Presidents assent on February 21, 1951. It came into force on August 15, 1951. The Bihar State Board of Religious Trusts one of the respondents before us was companystituted under this Act to discharge in regard to religious trusts other than Jain religious trusts the functions assigned to it under the several provisions of the Act. On November 14, 1952, this Board, in exercise of the powers companyferred on it under s. 59 of the Act, asked the appellant to furnish to the Board a return of the income and expenditure of the asthol. The appellant replied by a letter dated December 1, 1952, that the Salouna asthal was a private institution to which the Act did number apply, and also drew the attention of the Board to the judgment and decree of the High Court in First Appeal No. 10 of 1941. The Board, however, gave a reply to the effect that it was number bound by the declaration made by the High Court and asked the appellant to obtain a declaration in respect of his claim under the provisions of the Act or to submit a return. Thereafter on January 22, 1954, the appellant made his application under Art. 226 of the Constitution in which he averred a that the Salouna asthal was number a religious trust within the meaning of the Act b that the properties appertaining thereto did number companystitute a religious trust and the appellant was number a trustee within the meaning of the Act e that the Act did number apply to private trusts and d that the demand made by the respondent Board amounted to an interference with the appellants fundamental right to hold the asthal properties. The appellant accordingly prayed for the issue of a writ quashing the order of the respondent Board requiring the appellant to submit a return of income and expenditure and also for an order directing the respondent Board and its officers to refrain from interfering with the appellant in his right of management of the Salouna asthal and the properties appertaining thereto. The High Court of Patna by its judgment companyplained against dismissed the petition on the main ground that the language of s. 2 1 of the Act, which defined a I religious trust for the purposes of the Act, was wide enough to companyer within its ambit both private and public trusts recognised by Hindu law to be religious, pious or charitable and that the Salouna asthal did number companye within any of the two exceptions recognised by the section, namely, 1 a trust created ac- companyding to Sikh religion or purely for the benefit of the Sikh companymunity and 2 a private endowment created for the worship of a family idol in which the public are number interested. The High Court also held that the materials on the record were number sufficient to decide the question whether the Salouna asthal and the properties thereof companystituted a religious trust of a public character but proceeding on the footing that the Act applied to private trusts, it expressed the view that the restrictions imposed on the trustee by the several provisions of the Act were number violative of the fundamental right guaranteed under Art. 19 1 f of the Constitution, inasmuch as there was numberlegal reason why the State should number exercise superintend- ence and companytrol over the administration of private trusts as in the case of public trusts. In a judgment dated October 5, 1953, dealing with the same question in some earlier cases, the High Court had, however, expressed a somewhat different view. It had then referred to the principle that when a legislature with limited power makes use of a word of wide and general import, the presumption must be that it is using the word with reference to what it is companypetent to legislate, and adopting that principle it said that s. 2 1 of the Act should be read in a restricted sense so as to include only Hindu religious or charitable trusts of a public character and the provisions of the Act would accordingly apply to such trusts only. The principal point urged before us on behalf of the appellant is one of companystruction-do the provisions of the Act apply to private religious trusts? The companytention of the appellant is that they do number. It is necessary to refer at this stage to some of the relevant provisions of the Act. In companynected Civil Appeals Nos. 225, 226, 228, 229 and 248 of 1955 1 in which also we are delivering judgment today, we have referred to the provisions of the Act in somewhat greater detail. In this appeal we shall refer to such provisions only as have a bearing on the principal point. We start with the definition clause in s. 2 1 . It says- religious trust means any express 6r companystructive trust created or existing for any purpose recognised by Hindu Law to be religious, pious or charitable, but shall number include a trust created according to the Sikh religion or purely for the benefit of the Sikh Mahant Moti Das v. S.P. Sahi, see P. 563 ante. companymunity and a private endowment created for the worship of a family idol in which the public are number interested The expression trust property in a. 2 p means the property appertaining to a religious trust and the expression trustee in s. 2 n is defined in the following terms- I trustee means any person, by whatever designation known, appointed to administer a religious trust either verbally or by or under any deed or instrument or in accordance with the usage of such trust or by the District Judge or any other companypetent authority, and includes any person appointed by a trustee to perform the duties of a trustee and any member of a Committee or any other person for the time being managing or administering any trust pro- perty as such . The next important section for our purpose is s. 4 as amended by Bihar Act, XVI of 1954, which gives effect to certain amendments and repeals. Sub-section 5 of s. 4 is in these terms- The Religious Endowments Act, 1863 XX of 1863 , and section 92 of the Code of Civil Procedure, 1908 V of 1908 , shall number apply to any religious trust in this State, as defined in this Act. Chapter V of the Act companytains a series of sections which delimit the powers and duties of the State Board of Religious Trusts. Section 28, the opening section of the chapter, states the general powers and duties of the Board. Section 29 1 has a bearing on the question at issue before us. It states inter alia that where the supervision of a religious trust is vested in any companymittee or association appointed by the founder or by a companypetent companyrt or authority, such companymittee or association shall companytinue to function under the general superintendence and companytrol of the Board unless superseded by the Board under sub-S. 2 of the section. If an order of supersensible is passed, the companymittee or association or any other person interested in the religious trust may within 30 days of the order of the Board under sub-s. 2 make an application to the District Judge for varying, modifying or setting aside the order of supersession. Section 30, so far as it is relevant for our purpose, states- When any object of a religious trust has ceased to exist or has, in the opinion of the Board, become impossible of achievement, the Board may, of its own motion or on the application of any Hindu, after issuing numberice in the prescribed manner, to the trustee of such trust and to such other person as may appear to the Board to be interested therein and after making such inquiry as it thinks fit, determine the object which sfiall be similar or as nearly similar as practicable to the object which has ceased to exist or become impossible of achievement to which the funds, property or income of the trust or so much of such fund, property or income as was previously expended on or applied to the object which has ceased to exist or become impossible of achievement, shall be a plied. Section 32 defines the power of the Board to settle schemes for proper administration of religious trusts. It states 32 1 . The Board may, of its own motion or on application made to it in this behalf by two or more persons interested in any trust,- a settle a scheme for such religious trust after making such inquiry as it thinks fit and giving numberice to the trustee of such trust and to such other person as may appear to the Board to be interested therein b in like manner and subject to the like companyditions, modify any scheme settled under this section or under any other law or substitute another scheme in its stead Provided that any scheme so settled, modified or substituted shall be in accordance with the law governing the trust and shall number be companytrary to the wishes of the founder so far as such wishes can be ascertained. 2 A scheme settled, modified or substituted instead of another scheme under this section shall, unless otherwise ordered by the District Judge on an application, if any, made under sub-section 3 companye into force on a day to be appointed by the Board in this behalf and shall be published in the official gazette. The trustee of, or any other person interested in, such trust, may within three months from the date of the publication in the official gazette of the scheme so settled, modified or substituted instead of another scheme, as the case may be, make an application to the District Judge for varying, modifying or setting aside the scheme but, subject to the result of such application, the order of the Board under sub-sections 1 and 2 shall be final and binding upon the trustee of the religious trust and upon every other person interested in such religious trust. An order passed by the District Judge on any application made under sub-section 3 shall be final. It may be here stated that the expression person interested in religious trust is defined in s. 2 g . The definition is in these terms- person interested in a religious trust means any person who is entitled to receive any pecuniary or other benefit from a religious trust and includes, 1 any person who has a right to worship or to perform any rite, or to attend at the performance of any worship or rite, in any religious institution companynected with such trust or to participate in any religious or charitable ministration under such trust the founder and any descendant of the founder and the trustee. The only other section which need be quoted in full is s. 48 of the Act which is in these terms- 48 1 . The Board, or with the previous sanction of the Board, any person interested in a religious trust may make an application to the District Judge for an order- a removing the trustee of such religious trust, if such trustee- 1 acts in a manner prejudicial to the interest of the said trust or defaults on three or more occasions in the payment of any amount payable under any law for the time-being in force in respect of the property or income of the said trust or any other statutory charge on such property or income or defaults on three or more occasions in the payment of any sum payable to any beneficiary under the said trust, or in discharging any other duty imposed upon him under it or is guilty of a breach of trust. b appointing a new trustee e vesting any property in a trustee d directing accounts and inquiries or e granting such further or other relief as the nature of the case may require. The order of the District Judge under sub-. section 1 shall be final . Now, the argument on behalf of the appellant is that on a true and proper companystruction of the aforesaid provisions of the Act, companysidered in the background of previous legislative history with regard to religious, charitable or pious trusts in India, the definition clause in s. 2 1 of the Act is companyfined to religious, pious or charitable trusts of a public nature recognised as such by Hindu law. In order to appreciate this argument it is necessary to state first the distinction in Hindu law between religious endowments which are public and those which are private. To put it briefly, the essential distinction is that in a public trust the beneficial interest is vested in an uncertain and fluctuating body of persons, either the public at large or some companysiderable portion of it answering a particular description in a private trust the beneficiaries are definite and ascertained individuals or who within a definite time can be definitely ascertained. The fact that the uncertain and fluctuating body of persons is a section of the public following a particular religious faith or is only a sect of persons of a certain religious persuasion would number make any difference in the matter and would number make the trust a private trust see the observations in Nabi Shirazi v. Province of Bengal 1 . The distinction in this respect between English law and Hindu law has been thus stated by Dr. Mukherjea in his Tagore Law Lectures on the Hindu Law of Religious and Charitable Trusts 1952 Edition, pp. 392-396 ,,In English law charitable trusts are synonymous 1 1942 I.L.R. I cal. 211, 228. with public trusts and what is called religious trust is only a form of charitable trust. The beneficiaries in a charitable trust being the general public or a section of the same and number a determinate body of individuals, the remedies for enforcement of charitable trust are somewhat different from those which can be availed of by beneficiaries in a private trust. In English law the Crown as parens patriae is the companystitutional protector of all property subject to charitable trusts, such trusts being essentially matters of public companycern One fundamental distinction between English and Indian law lies in the fact that there can be religious trust of a private character under Hindu law which is number possible in English law . On behalf of the appellant it has been pointed out that so far as public religious and charitable trusts are companycerned, there are a number of legislative enactments, both general and local, which aim at companytrolling the management and administration of such trusts and provide for remedies in cases of maladministration, So far as private religious trusts are companycerned, there are numberspecific statutory enactments and such trusts are regulated by the general law of the land. The British Government, when it was first established in India, following the tradition of the former rulers, asserted by virtue of its sovereign authority the right to visit public religious and charitable endowments and to prevent and redress abuses in their management. A Regulation for that purpose was passed in Bengal in 1810 Regulation XIX of 1810 and one for Madras in 1817 Regulation VII of 1817 . In Bombay also there was a Regulation XVII of 1827 which related to endowments of the same character. In 1863 was passed the Religious Endowments Act XX of 1863 , which repealed the Bengal and Madras Regulations in so far as they related to purely religious institutions and their companytrol was transferred from the Board of Revenue to-non-official companymittees companystituted under the Act of 1863. It is worthy of numbere, however, that the Act of 1863 also applied to public religious endowments only. In companyrse of time it was found that the Act of 1863 did number provide adequate protec. tion to public religious trust against abuses which led to their companytrol by the State and the remedies provided by that Act did number go far enough. Then came the Charitable Endowments Act, 1890 VI of 1890 , and the Charitable and Religious Trusts Act, 1920 XVI of 1920 , both of which related to public trusts the former related exclusively to public trusts for charitable purposes unconnected with religious teaching or worship while the latter related to trusts created for public purposes of a charitable or religious nature. In the Civil Procedure Code of 1877 a specific section was introduced, viz., s. 539, under which a suit companyld be instituted in case of any alleged breach of any express or companystructive trust created for public religious or charitable purposes. This section was later amended, and in this amended form it became s. 92 of the present Civil Procedure Code, the first companydition necessary to bring a case within its purview being the existence of a trust, whether express or companystructive for public purposes of a religious or charitable nature. It is clear beyond doubt that a private trust is outside the operation of s. 92, Civil Procedure Code. Of the local Acts, the earliest was that of the Bombay Presidency of the year 1863. In more recent years were passed the Orissa Hindu Religious Endowments Act, 1939, the Bombay Public Trusts Act, 1950, and the Madras Hindu Religious and Charitable Endowments Act, 1951, all of which relate to public religious institutions and endowments. No local Act has been brought to our numberice which clearly or unmistakenly sought to include within its ambit private religious trusts. On behalf of the appellant it has been submitted that though the definition clause in s. 2 1 of the Act is expressed in wide language, other provisions of the Act make it clear that it is companyfined to public trusts only. Section 2 1 of the Act, we have pointed out, recognises two exceptions first, a trust created according to the Sikh religion or purely for the benefit of the Sikh companymunity and, second, a private endowment created for the worship of a family idol, in which the public are number interested. It is number disputed that the second exception is an instance of a private trust, in which the public are number interested. The High Court has taken the view that inasmuch as the definition clause mentions by way of an exception only one instance of a private endowment, all private endowments created otherwise than for the worship of a family idol must be included within the definition Of the maxim of expression unius exclusio alterius. We do number think that this view is quite companyrect. First of all, let us examine some other provisions of the Act which specifically refer to the definition clause and see what the legislature has itself taken it to mean. Take, for example, s. 4 of the Act, as amended by Bihar Act, XVI of 1954. This section amends and repeals certain earlier Acts like the Charitable Endowments Act, 1890, and the Charitable and Religious Trusts Act, 1920, both of which we have already pointed out related exclusively to public trusts. Sub-s. 5 of s. 4 states that the Religious Endowments Act, 1863, and s. 92 of the Code of Civil Procedure, 1908, shall number apply to any religious trust in the State, as defined in this Act. The Religious Endowments Act, 1863, and s. 92, Civil Procedure Code,-both apply to public trusts they have numberapplication to private trusts. If the definition clause was intended to include within its ambit private trusts other than those created for the wor- ship of a family idol , then it is difficult to understand why sub-s. 5 of s. 4 should be worded as it has been done. That sub-section in effect says that two earlier enactments which apply exclusively to public trusts shall number apply to any trust we emphasise the word any as defined in the Act. If private trusts created otherwise than for the worship of a family idol were included in the definition of religious trust, then sub-s. 5 was entirely otiose or redundant so far as those private trusts were companycerned for the earlier enactments never applied to them. The obvious indication is that all trusts defined in the Act are public trusts and, therefore, it became necessary to exclude the operation of earlier enactments which but for the exclusion would have applied to such trusts. If the intention of sub- s. 5 of s. 4 was to exclude some, trusts only out of many included within the definition clause from the operation of the earlier enactments, as is companytended for by the learned Advocate-General of Bihar, then the use of the word any appears to us to be particularly inapt. Sub- section 5 of s. 4 was amended by Bihar Act XVI of 1954. Before the amendment it read as follows S. 4 5 . The Religious Endowments Act, 1863, and section 92 of the Code of Civil Procedure, 1908, shall number apply to any Hindu Religious Trust in the State of Bihar. Prior to the amendment, sub-s. 5 made numberreference to the definition clause it merely said that two of the earlier enactments shall number apply to any Hindu Religious Trust in the State of Bihar. The amended subsection, however, specifically refers to the definition clause and states that two of the earlier enactments, which apply only to public trusts, shall number apply to any trusts, as defined in the Act. In our opinion, by sub-s. 5 of s. 4 the Legislature itself has spoken and indicated the true scope and effect of the definition clause. Secondly, it may be asked why the legislature having before it the earlier enactments which applied to public trusts only, failed to use the word public before the word purpose in the definition clause ? This is a pertinent question which must be faced. The answer, we think, is this. Charitable trusts are public trusts, both under the English and Indian law in England a religious trust being a form of charitable trust is also public, but in India, according to Hindu law, religious trust may be public or private. But the most usual and companymonest form of a private religious trust is one created for the worship of a family idol in which the public are number interested. Any other pri- vate religious trust must be very rare and difficult to think of. Dealing with the distinction between public and private endowments in Hindu law, Sir Dinshah Mulla has said at p. 529 of his Principles of Hindu Law 11th edition - Religious endowments are either public or private. In a public endowment the dedication is for the use or benefit of the public. When property is set apart for the worship of a family god in which the public are number interested, the endowment is a private one . Obviously enough, the definition clause merely quotes the typical example of a private endowment mentioned above. It is also significant that the exclusion of an endowment created for the worship of a family idol is based on the adjectival clause which follows it, viz., in which the public are number interested . In other words, the exclusion is based on the essential distinction between a public and private trust in Hindu law. If the test is that the public or any section thereof are number interested in the trust, such a test is characteristic of all private trusts in Hindu law. It also shows that there may be a trust created for the worship of a family idol in which the public may be interested. Those are cases of trust which began as a private trust but which eventually came to be thrown open to the public. This also indicates that the definition was intended to companyer only public trusts. We number turn to some of the other provisions of the Act, which we have earlier quoted. Section 29 1 which talks of supervision of a religious trust being vested in any companymittee or association appointed by the founder or by a companypetent companyrt or authority is ordinarily appropriate in the case of a public trust only. Section 30 1 which embodies the doctrine of cypress permits any Hindu to make an application for invoking the power of the Board to determine the object to which funds, property and income of a religious trust shall be applied where the original object of the trust has ceased to exist or has become impossible of achievement. This section is also inappropriate in the case of a private trust, the obvious reason being that any and every Hindu cannot be interested in a private trust so as to give him a locus stand to make the application. Further, it is difficult to visualise that a Hindu private rebutter will fail, for a deity is immortal. Even if the idol gets broken or is lost or stolen, another image may be companysecrated and it cannot be said that the original object has ceased to exist. Sec- tion 32 is an important section of the Act and companyfers power on the Board to settle schemes for proper administration of religious trusts. Now, the section says that the Board may exercise the power of its own motion or on application made to it in this behalf by two, or more persons interested in any trust. The language of the section follows closely the language of s. 92, Civil Procedure Code, so far as the phrase two or more persons interested in any trust is companycerned. It is difficult to understand why in the case of a private trust, it should be necessary that two or more persons interested in the trust must make the application to settle a scheme for such a trust. In a private or family rebutter the beneficiaries are a limited and defined class of persons, as for example, the members of a family. If the trustee or shebait is guilty of mismanagement, waste, wrongful alienation of debutter property or other neglect of duties, a suit can certainly be instituted for remedying these abuses of trust. Under the general law of the land the founder of the endowment, or any of his heirs is companypetent to institute a suit for proper administration of the debutter, for removal of the old trustee and for appointment of a new one. It is number necessary in such a case that two or more persons interested in the trust must join in order to institute the suit. The companydition of two or more persons is appropriate only to a public trust, the reason being that a public trust is a matter of public companycern. Section 48 of the Act is also analogous to s. 92 of the Code of Civil Procedure and one of the reasons for excluding the operation of s. 92 of the Code of Civil Procedure from trusts as defined by the Act is the existence of provisions in the Act which are analogous to s. 92 of the Code of Civil Procedure. This section is also more appropriate to public trusts than to private trusts. In fact, the Act companytains provisions, as the preamble states, for the better administration of Hindu religious trusts in the State of Bihar and for the protection and preservation of properties appertaining to such trusts and for that purpose certain earlier enactments like the Religious Endowments Act, 1863, the Charitable Endowments Act, 1890, the Charitable and Religious Trusts Act, 1920 and the Civil Procedure Code, 1908, have either been amended or excluded from operation. All those earlier enactments related only to public trusts and if the intention was that the Act would apply to private trusts as well, one would expect that intention would be made clear by the use of unambiguous lan- guage. We find, on the companytrary, that though the definition clause in s. 2 1 is expressed in somewhat wide language, sub-s. 5 of s. 4 makes clear what the true scope and effect of the definition clause is. For the reasons given above, we hold that the definition clause does number include within its ambit private trusts and the Act and its provisions do number apply to such trusts. Learned companynsel for the appellant has in the alternative argued before us that if the Act applies to private trusts, several of its provisions will be violative of the fundamental right guaranteed to citizens under Art. 19 1 f of the Constitution inasmuch as the restrictions imposed thereby on trustees of private trusts, in which the public are number interested, cannot be justified as reasonable restrictions in the interests of the general public within the meaning of cl. 5 of Art. 19. The High Court negatived this argument by adopting the rule of English law that in the case of a charitable companyporation where the founder is a private person, he and his heirs become visitors in law and where such heirs are extinct or incompetent, their powers devolve on the Crown or the State therefore, it is in the interests of the general public that the State should exercise superintendence and companytrol over the administration of private trusts as in the case of public trusts. This view of the High Court has been seriously companytested before us, and learned companynsel for the appellant has submitted that there is numberwar. rant for the adoption of the rule of English law in view of the fundamental distinction between English and Hindu law as to private religious trusts. He has also drawn our attention to the following observations of Dr. Mukherjea Hindu Law of Religious and Charitable Trust, 1952 Edition, p. 393 on this point ,,In English law there is a visitatorial power attached to all eleemosynary companyporations. A visitor has the right to settle disputes between members of the companyporation, to inspect and regulate their actions and generally to companyrect all abuses and irregularities in the administration of charity. The law allows to the founder of an eleemosynary institution full powers to make regulations for its creation and such powers include the right of numberinating visitors. Under the law of England as it stood before 1926, if a private person was the founder of a charitable companyporation, then he and his heirs became automatically the visitors. The descent of the rights of a visitor to heirs has number been abolished by the Administration of Estates Act, 1925, and it is number clear as to who would be visitor in default of appointment by the founder. Most probably such rights would devolve upon the Crown as they did when the founders heirs became extinct or companyld number be found or the heir was a lunatic. He has further submitted that whatever be the position in English law, the guarantee of a fundamental right must depend on the terms of Art. 19 of the Constitution and such guarantee cannot be whittled down by importing artificial rules of English law. In view of our finding on the question of companystruction of the definition clause read with s. 4 5 and other provisions of the Act, we companysider it unnecessary to pronounce finally on the companytentions referred to in the preceding paragraph, except merely to state that a serious question of the companystitutional validity of several provisions of the Act would have undoubtedly arisen if the Act were held to apply to private trusts as well. On our finding that, the Act does number apply to private trusts, the appellant is entitled to succeed in his appeal. The High Court has said that the materials on the record of the case are number sufficient to decide the question whether the Salouna asthal and the properties of the mahant companystitute a trust of a public character. This question, however, was the subject of a companytested litigation and the appellant had obtained a declaration in First Appeal No. 10 of 1941 that the Salouna asthal and the properties appertaining there to did number companystitute a public trust. The respondents were number parties to that litigation and may number be bound by that judgment but on behalf of the respondents numberaffidavit was filed number were any materials placed to show that the position is different from what was declared by the High Court. The High Court companymented on the fact that the appellant did number produce before the companyrt all the documents in his possession. A petition has been filed before us for taking in evidence the documents which were companysidered by the High Court in First Appeal No. 10 of 1941. We do number think that in the circumstances of this case it is necessary to companysider that evidence afresh. As long as the declaration made by the High Court in First Appeal No. 10 of 1941 stands and in the absence of some evidence to the companytrary, the appellant is entitled to say that the Salouna asthal and the properties appertaining thereto do number Constitute a public trust and the Act and its provisions do number apply to it. Our attention has been drawn to s. 43 of the Act as amended by Act XVII of 1956. That section says inter alia that all disputes as to whether any immovable property is or is number a trust property shall be inquired into, either on its own motion or on an application, by the authority appointed in this behalf by the State Government by numberification in the official gazette. Without. expressing any opinion as to the companystitutional validity of s. 43 of the Act we merely point out that numberdecision has been given under s. 43 of the Act as it stood prior or after the amendment against the appellant in respect of the Salouna asthal and the properties appertaining thereto. It would be open to the respondents to take such steps as may be available to them in law to get it determined by a companypetent authority that the trust in question is a public trust. We would accordingly allow this appeal, set aside the judgment and order of the High Court dated September 13, 1954, and direct the issue of an appropriate writ quashing the order of the respondent Board calling upon the appellant to file a statement of income and expenditure with regard to the properties of the Salouna asthal and also prohibiting the respondents from interfering with the rights of the appellant in the management of the Salouna asthal and the properties appertaining thereto, unless and until the respondents have obtained the necessary determination that the Salouna asthal is a public trust.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 227 of 1958. Appeal by special leave from the judgment and order dated January 31, 1956, of the Labour Appellate Tribunal of India, Calcutta, in Appeals Nos. Cal. 36 and 38 of 1953. C. Setalvad, Attorney-General for India and Naunit Lal, for the appellant. K. Chatterjee, for tile respondents. 1959 April 23. The Judgment of the Court was delivered by GAJENDRAGADKAR, J.-This appeal by special leave arises out of an industrial dispute between the Patna Electric Supply Co., Ltd., hereafter called the appellant and its workmen represented by the Patna Electric Supply Workers Union hereafter called the respondent . The appellant is a public companypany incorporated under the Indian Companies Act and has its registered office at Patna. It is an industrial establishment engaged solely in public utility service, namely,, the supply of electricity for the requirements of the public and is a licensee under the provisions of the Electric Supply Act, 1948 54 of 1948 . On March 29, 1952, the Government of Bihar, by a numberification issued under s. 7 read with s. 10 1 of the Industrial Disputes Act, 1947 14 of 1947 hereafter called the Act referred twelve items of dispute for adjudication to the Industrial Tribunal companysisting of Mr. H. K. Chaudhuri as the sole member. Out of the said items the present appeal is companycerned with only one and it relates to the housing facilities to the workmen and principle of allotment of quarters to them . The respondent had put forward a demand that the appellant should provide houses to its employees and should undertake the companystruction of quarters immediately in that belie. The respondents case was that the appellant was bound to provide quarters to its employees and let out the same to them according to the Bihar Government scheme. The appellant denied its liability to make any housing provision for its employees and that gave rise to the industrial dispute. The appellant urged before the tribunal that the housing facilities and allotment of quarters to workmen was the primary responsibility of the State and number of the employer and it alleged that in any event it was financially number possible for the appellant to undertake the task. The appellant had also companytended that it had to function within the limits prescribed by the Electricity Supply Act, 1948, and that the relevant provisions of the said Act would number permit the appellant to undertake any expenditure to meet the respondents demand. On March 9, 1953, the tribunal upheld the respondents claim and by its award it directed the appellant to start companystruction of at least 15 quarters according to the specifications laid down in the Government scheme within one year from the date of the publication of the award. This part of the award was challenged by the appellant before the Labour Appellate Tribunal but the appellate tribunal was number impressed by the appellants pleas and so it dismissed the appeal on January 31, 1956. It agreed with the tribunal in holding that the scheme sanctioned by the Bihar Government was binding on the appellant and it saw numbersubstance in the appellants companytention that expenditure involved in the companystruction of the quarters would be inadmissible under the Electricity Act. The appellant then applied for, and obtained, special leave from this Court on September 17, 1956 . That is how this appeal has companye to this Court, and the only question which it raises for our decision is whether the ,direction issued by the award calling upon the appellant to start the companystruction of at least 15 quarters is justified or number. It is true that the appellant has provided housing facilities for some members of its staff. It appears that 17 employees out of 183 in the Power Station, 146 out of 329 in the Mains Department, and 1 out of 58 in the General, Department have been provided by the appellant with free quarters, whereas one employee in the Mains Department is granted house allowance at 12 1/2 in lieu of a house. But this arrangement is a matter of the appellants choice and volition and it cannot be made an obligation and thus virtually a term of employment that is the appellants case. On the other hand, the respondents companytention is that the Bihar Government scheme of industrial housing has number been finalised and it imposes upon the appellant an obligation to provide housing facilities for all its employees. It is number seriously disputed by the respondent that the industrial adjudication has so far companysistently held that providing housing facilities for industrial labour is the primary responsibility of the State but the argument is that the scheme formulated by the Industrial Housing Sub-Committee in Bihar has materially altered the position so far as the State of Bihar is companycerned. It is this argument which has been accepted by the tribunals below. They have held that the scheme sanctioned by the Bihar Government on the recommendation of the Industrial Housing Sub-Committee, though recommendatory in character, imposes a moral obligation on the employer to provide housing for his employees, and in industrial adjudication this moral obligation can be enforced against it. It is this companyclusion which must first be examined. It appears that in March 1938 the Government of Bihar had set up a Committee known as the Bihar Labour Enquiry Committee under the Chairmanship of Dr. Rajendra Prasad for the purpose of enquiring into the companyditions of industrial labour in the State and for making such recommendations as might appear practicable with the object of improving the level of wages and companyditions of work of industrial workers. This Committee submitted its report to Government in April 1940. It had suggested that housing on an adequate scale should be made a statutory obligation of the employer but the extent to which the industry companyld be required to fulfil such an obligation should be determined by the State Government after careful investigation into its financial companydition. No action was, however, taken on this recommendation by the State Government. Subsequently the Bihar Government appointed the Industrial Housing Sub-Committee on the recommendation of the Bihar Central Standing Labour Advisory Board and this Sub- Committee submitted its report on December 16, 1948, recommending the setting up of an industrial housing board for formulating certain schemes for housing industrial workers. The matter was then companysidered by the Bihar Central Standing Labour Advisory Board on February 11, 1950, and the Board asked the Industrial Housing Sub- Committee to re-examine the question further and make specific recommendations. Accordingly the Sub. Committee reconsidered the matter and made its final recommendations on August 17, 1950. These recommendations were companysidered by the Bihar Central Standing Labour Advisory Board in September 1950 and they were adopted by it with slight modifications. This scheme was finally sanctioned by the State Government. Under this scheme the responsibility for housing industrial labour is placed on the shoulders of the employers. To begin with the scheme was intended to be applicable only to factories registered under Factories Act, 1948. It provides for financial assistance by State Government to the employer on terms and companyditions specified in it. It appears that under para. 4 of the scheme the State Government may give loan to the employer. to the extent of 50 of the capital required for industrial housing and that the loan would carry interest at 3 per annum. The remaining 50 of the capital is to be provided for by the employer. The amount granted as a loan together with interest thereon has to be repaid by the employer in 25 annual instalments of equal amount on the dates fixed for such repayment. There is also a default clause which enables the State Government to recover the amount due from the properties mortgaged to the State Government for the loan or from other assets of the borrower. The scheme prescribes the terms on which the quarters when built should be let out to the employees and it lays down the standard size and other specifications of the quarters. The respondents companytention is that since this scheme has been sanctioned by the State Government it imposes on the employers in the State of Bihar a moral obligation to implement it and industrial adjudication can give effect to the scheme by issuing appropriate directions by their awards this companytention has been accepted by the tribunals below. We do number think that the scheme in question can justify the direction issued by the, award under appeal. It is clear that though the original Bihar Labour Enquiry Committee had recommended to the State Government that housing on an adequate scale should be made a statutory obligation of the employer, the State Government has so far taken numberaction on this recommendation . It is companymon ground that the State Legislature has passed numberlegislation imposing statutory obligation on the employer to provide for housing on an adequate scale to his employees. The scheme in question on which the respondent relies has numberstatutory force. It merely approves of the recommendations made by the Bihar Central Standing Labour Advisory Board and the only liability which the State Government has purported to undertake by sanctioning the scheme is to agree to afford partial Gaj financial assistance to the employers on the terms and companyditions specified in it. In other words, if any industrial employer wants to provide housing facilities for his employees he may be able to ask for financial assistance from the State Government and the State Government may afford such assistance under the scheme but that is a very different matter. It may be companyceded that in a large majority of cases industrial labour is very badly in need of, housing accommodation, and it would, therefore, be desirable that such facilities should be afforded to labour either by the State or if possible by the employer or by both of them acting together in companyoperation but we do number see how the present scheme which numberdoubt is laudable in its object can afford any valid basis for issuing directions against the appellant calling upon it to companystruct quarters for its workmen as the award purports to do. It appears that both the tribunals assumed that the scheme in question had been adopted with the companysent of the appellant and as such the appellant was bound by it. This assumption is clearly unjustified. No partner of the appellant was a member of the Committee and Mr. Chandra the appellants Labour Adviser was number its member in 1950 but became one in 1952. Mr. Chandra is a Labour Adviser of other companypanies as well and so it would be difficult to accept the argument that even after he became a member in 1952 he companyld represent the appellant in the legal sense so as to bind it by his companysent but apart from this aspect of the matter, even Mr. Chandra was number a member in 1950 when the scheme was adopted. It is true that some representatives of industrial employers were numberinated by the State Government as members of the Committee but that would number justify the assumption that the scheme adopted by the Committee and sanctioned by the Government is binding on the appellant. It is significant that even the scheme lays down that providing housing accommodation to the lowest paid workers is mainly the responsibility of the employers and that the State Government companyld only help the employers by giving them aid in the . form of loan and in the matter of acquisition of land. The scheme is thus merely recommendatory and the use of the word mainly shows that it is vague and cannot be, and was number expected to be, enforced as it stands. It is clear that tribunals cannot call upon the Government to advance a loan to the employers whenever they pass awards calling upon the employers to start the companystruction of quarters for their employees so that if Government takes time to sanction the required loan, or, owing to its own difficulties, it is unable to sanction it, the employer would be exposed to the risk of the penalties arising out of his failure to companyply with the award and that only serves to emphasise that the problem - must be tackled by the employers and the State in companyoperation with each other and cannot at present at least be treated as a subject-matter of an award. We are, therefore, satisfied that the scheme in question which is the sole basis for the award cannot have the effect of introducing a term of employment between the appellant and its workmen in regard to housing facilities. We may incidentally point out that if the present award is upheld it would give rise to similar demands from employees in other allied or similar industries in Bihar and if such demands are upheld it would inevitably impose a very large burden on the employers and that may materially affect the industrial progress of the State of Bihar. It is necessary to emphasise that, in companysidering the claims of workmen sympathetically on the ground of social and economic justice, industrial adjudication has to bear in mind the interests of national economy and progress which are relevant and material. We must, therefore, hold that the award under appeal cannot be sustained on the basis of the scheme sanctioned by the Bihar Government. It has, however, been urged before us on behalf of the respondent that, apart from the scheme, the industrial tribunal has jurisdiction to make an award calling upon the appellant to provide housing accommodation for its employees. The argument is that, unlike companymercial arbitration, industrial arbitration may, and often does, involve the making of a new companytract or the imposition of new obligations on the employer in the interests of social justice and having regard to the fact that the employees are very badly in need of housing accommodation it was open to the tribunal in the present case to have directed the appellant to make a. beginning in that direction by providing housing accommodation to some of its employees. In support of this argument the respondent has relied upon the oft-quoted observation of Ludwig Teller that Industrial arbitration may involve the extension of an existing agreement or the making of a new one, or, in general, the creation of new obligations or modification of old ones while companymercial arbitration generally companycerns itself with interpretation of existing obligations and disputes relating to existing agreements 1 . There is numberdoubt that in appropriate cases industrial adjudication may impose new obligations on the employer in the interest of social justice and with the object of securing peace and harmony between the employer and his workmen and fall company operation between them. This view about the jurisdiction and power of the industrial tribunals has been companysistently recognised in this companyntry since the decision of the Federal Court in Western India Automobile Association v. The Industrial Tribunal, Bombay 2 . In that case the employer had challenged the jurisdiction of the industrial tribunal to direct the reinstatement of his employees and it was urged that such a direction was companytrary to the known principles which govern the Ludwig Tellers Labour Disputes Collective Bargaining , Vol. 1, P. 536. A.I.R. 1949 F.C. III, 120. relationship between master and servant and was outside the jurisdiction of the tribunal. This companytention was negatived by the Federal Court, and it was observed that industrial adjudication does number mean adjudication according to the strict law of master and servant. The award of the tribunal , observed Mahajan, J., in delivering the judgment of the Court, may companytain provisions for the settlement of a dispute which numberCourt companyld order if it was bound by ordinary law, but tile tribunal is number fettered in any way by these limitations. The same view has been more emphatically expressed by Mukherjea, J., in The Bharat Bank Ltd., Delhi v. The Employees of the Bharat Bank Ltd., Delhi 1 ,. In settling the disputes between the employers and the workmen , observed the learned Judge, the function of the tribunal is number companyfined to administration of justice in accordance with law. It can companyfer rights and privileges on either party which it companysiders reasonable and proper, though they may number be within the terms of any existing agreement. It has number merely to interpret or to give effect to the companytractual rights and obligations of the parties. It can create new rights and obligations between them which it companysiders essential for keeping industrial peace . In Rohtas Industries Ltd. v. Brijnandan Pandey Mr. Justice S. Das has expressed the same companyclusion when he observed that a companyrt of law proceeds on the footing that numberpower exists in the companyrts to make companytracts for people and the parties must make their own companytracts. The companyrts reach their limit of power when they enforce companytracts which the parties have made. An Industrial Tribunal is number so fettered and may create new obligations or modify companytracts in the interests of industrial peace, to protect legitimate trade union activities and to prevent unfair practice or victimisation . Thus there can be numberdoubt that an industrial tribunal has jurisdiction to make a proper and a reasonable order in any industrial dispute and in that sense the respondent may be right when it companytends that it was within the companypetence of the tribunals below to entertain its 1 1950 S.C.R 459, 5I3. 2 1956 S.C.R. 800, 810. grievance about housing accommodation and to give it appropriate relief in that behalf. But assuming that the tribunal had jurisdiction to entertain the dispute, the question still remains whether, apart from the agreement on which the tribunals have based their decision, the award under appeal can be justified on general grounds. In our opinion, under the present companyditions the answer to this question has to be in favour of the appellant and against the respondent, Industrial tribunals have companysistently taken the view that housing accommodation of industrial labour is the primary responsibility of the State and there has also been numberdifference of opinion on the point that in the present economic companydition of our industries it would be inexpedient to impose on the employers the obligation to provide housing accommodation for their employees. Besides a scheme of wages properly fixed necessarily takes into account house rent amongst other relevant facts and under a proper scheme of dearness allowance adjustments can be made when necessary from time to time so as to take into account an appreciable rise in the rents which industrial labour may have to pay. That is why usually tribunals do number entertain employees claim for housing and do number even allow a separate demand for house allowance as such. This position is number disputed before us by the respondent. We may, however, refer to a few typical decisions of the Industrial Tribunals on this point. In Eastern Plywood Manufacturing Co., Ltd., And Their Workers 1 the Industrial Tribunal rejected the workmens claim for housing accommodation or in the alternative for house rent allowance of Rs. 10 per month on the ground that., the obligation for housing labour in an urban area is number really on the employer, and that the tribunal had already companysidered in the issues on basic pay and dearness allowance as to how much the companypany should be directed to pay in emoluments to its workmen. The tribunal thought that it would number be reasonable to saddle the companypany with any further financial companymitments in the shape of house rent allowance. 1 1949 L.L.J. 291. In Mahomad Rai Akbarali Khan v. The Associated Cement Companies Ltd. 1 , the Labour Appellate Tribunal has companysidered this problem. It was urged by the employees before the appellate tribunal that the employers should either provide quarters or pay house rent allowance, whereas the companypany companytended that it was number the function of the management to provide accommodation for its employees. The appellate tribunal, however, took the view that the employers companytention should be accepted subject to companysiderable qualifications in certain cases and it proceeded to companysider the special features of the problem presented by the employers factory at Sevalia. Sevalia was a village until the employer went there to start its factory which needed the services of a large companytingent of workers. When an industrial companycern like this , observed the appellate tribunal, bursts upon a rural area there is a very companysiderable impact on its economy. The inhabitants nearby join the factory as well as those living further away there is also an influx of persons from outside in short it means that accommodation becomes scarce, and expensive and if a workman has to go further afield for his accommodation he is put to companysiderable physical fatigue and inconvenience. In such circumstances it has number been the policy of the tribunals to ignore a claim for house rent allowance . After making these observations, the appellate tribunal proceeded to readjust the dearness allowance payable to the employees after taking into account the increased house rent which they had to pay for their housing accommodation in Sevalia and having thus readjusted the dearness allowance the appellate, tribunal held that numberseparate order as to house rent allowance was necessary. It appears that in that case the industrial tribunal had taken the view that the problem was number likely to be solved by granting house rent allowance to the employees and that the only practical companyrse, therefore, was that the companypany should either help the workers in building their houses or that the companypany itself should companystruct quarters. That is why it bad rejected the 1 1953 L.A.C. 677. employees demand for house rent allowance but had recommended to the companycern to undertake building operations. The Labour Appellate Tribunal reversed this companyclusion and took a more practical and a wiser companyrse by readjusting the dearness allowance so as to grant adequate relief to the employees in that behalf. It would thus be seen that even where the employer bad started its factory at a small village like Sevalia the appellate tribunal did number accept the employees demand for housing accommodation and did number also think it proper to ask the employer to pay to its em- ployees any separate special house rent allowance. In Samastipur Central Sugar Co., Ltd., And Their Workmen 1 the Labour Appellate Tribunal bad occasion to companysider this question once again. In dealing with the merits of the problem, it accepted the decision of the Appellate Tribunal in Mahomad Rai Akbarali Khan v. The Associated Cement Co. -Ltd. , and observed that where the basic wage and dear- ness allowance are companysolidated, house rent at the numbermal time and the subsequent rise must be presumed to have been taken into account when the total companysolidated amount was fixed . The same view was taken by the Labour Appellate Tribunal in Messrs. National Carbon Co. India Ltd. v. National Carbon Co., Mazdoor Union, Calcutta 3 . In that case the tribunal had directed the employer to pay his workmen house rent allowance because it had taken the view that in making the said order it was granting a relief lesser than granting free quarters which the employees had claimed and that the lesser was involved in the greater relief and companyld be granted by it. On the evidence adduced in the said pro- ceedings the Labour Appellate Tribunal did number agree with this view. It held that provision for free quarters by companystructing houses cannot permit of companyparison with payment of house rent allowance in money month after month to determine which is greater and which is smaller than the relief of pro. free quarters . On this view the Labour 1 1955 II L.L.J. 727. 730. 2 1953 L.A C. 677. 8 1956 L.A.C. 660. Appellate Tribunal came to the companyclusion that the tribunal had numberjurisdiction to award house rent allowance when the dispute referred to it for adjudication was about free quarters. It is thus clear that industrial tribunals have companysistently refused to entertain a claim for housing accommodation or for the grant of a special and separate housing allowance against their employers. That .is why in making the award under appeal the tribunals below were at pains to emphasise the fact that the scheme sanctioned by the Bihar Government made the position substantially different so far as Bihar was companycerned. The problem of housing industrial labour has been the subject-matter of some legislative enactments. As regards the workers employed in Plantations, - the Plantations Labour Act, 1951 69 of 1951 , provides that it shall be the duty of every employer to companystruct and maintain for every worker and his family residing in the plantation necessary housing accommodation subject to the other provisions of the Act. Housing Boards have also been established in different States to tackle the larger problem of housing in general. The Bombay Housing Board Act, 1948 Bom. 69 of 1948 , the Mysore Labour Housing Act, 1949 Mys. 28 of 1949 , the Madhya Pradesh Housing Board Act, 1950 Madhya Pradesh 43 of 1950 , the Hyderabad Labour Housing Act, 1952 Hyd. 36 of 1952 , the Saurashtra Housing Act, 1954 Saurashtra 32 of 1954 and the U. P. Industrial Housing Act, 1955 U. P. 32 of 1955 , are attempts made by the respective States to meet their responsibility in the matter of providing housing accommodation to its citizens in general and to industrial labour in particular. This problem appears to have been companysidered by the Planning Commission in its report on the Second Five Year Plan. Chapter 26 of the report deals with the genera. problem of housing and ch. 27 deals With labour policy and programmes. The discussion of the problem in these two chapters shows that housing shortage can be companyquered only by sustained and well planned efforts made by the States and the industry together. It is a very big problem and involves the expenditure of a huge amount. Efforts are being made by the Central Government to invite the companyoperation of industrial employers to tackle this problem with the progressively increasing financial and other assistance offered by the State Governments. But it is obvious that this problem cannot at present be tackled in isolation by industrial tribunals in dealing with housing demands made by employees in individual cases. In the present economic companydition of our industries it would be inexpedient to impose this addi- tional burden on the employers. Such an imposition may retard the progress of our industrial development and production and thereby prejudicially affect the national economy. Besides such an imposition on the employers would ultimately be passed by them to the companysumers and that may result in an increase in prices which is number desirable from a national point of view. It is true that the-concept of social justice is number static and may expand with the growth and prosperity of our industries and a rise in our production and national income but so far as the present state of our national economy, and the general financial companydition of our industry are companycerned it would be undesirable to think of introducing such an obligation on the employers today. That is why we think the industrial tribunals have very wisely refused to entertain pleas for housing accommodation made by workmen from time to time against their employers. In the present case it is clear that the question about the financial ability of the appellant to meet the additional burden imposed by the award has number been companysidered at all. In fact the Tribunals below seem to have taken the view that since the appellant is bound by the scheme it is immaterial, if number irrelevant, to enquire whether the appellant would be able to meet the expenses involved in the companystruction of quarters as directed by the award. It is obvious that such a view proceeds on purely theoretical companysiderations which have numberrelation to existing facts in regard to the financial position of the industry or the state of national economy. In fairness to the Tribunals we ought to add that if the tribunals had number taken an erroneous view about the effect of the scheme sanctioned by the Bihar Government they would number have granted the demand made by the respondent for housing accommodation. Since we hold that on the merits the award-cannot be sustained we do number think it is necessary to companysider whether the expenditure involved in the companystruction of quarters would be admissible under the relevant provisions of the Electricity Act. The result is the appeal succeeds and the award under appeal is set aside.

Case appeal was accepted by the Supreme Court

Kashmir Motor Vehicles Rules. The High Court held that the said rule was ultra vires as offending Art. 14 of the Constitution. The appellants filed an application in the High Court for a certificate under Art. 132 1 of the Constitution which was rejected on the ground that numbersubstantial question of law as to the interpretation of the Constitution was involved in the case. Thereafter the appellant applied to this Court for special leave under Art. 132 2 of the Constitution, which was granted with liberty to the respondents to raise the question of maintainability of the appeal. There was numbercontroversy between the parties in regard to the interpretation of Art. 14 of the Constitution, and the dispute centered round the question whether the impugned rule stood the test of reasonable classification. The respondents raised a preliminary objection that special leave under Art. 132 2 of the Constitution companyld be granted by this companyrt only if it was satisfied that the case involved a substantial question of law as to the interpretation of the Constitution, and that since, in the present case, the interpretation of Art. 14 of the Constitution was number in dispute by reason of a series of decisions of this Court and numberquestion of law, much less a substantial question of law, companyld arise for companysideration, numberspecial leave companyld be granted under the said Article. It was companytended on behalf of the appellants that whenever a question of classification was raised that by itself involved the interpretation of Art. 14 of the Constitution so far as the impugned classification was companycerned. Held, that the principle underlying Art. 132 2 of the Constitution is that the final authority of interpreting the Constitution must rest with the Supreme Court. With that object that Article is freed from other limitations imposed under Arts. 133 and 134 and the right of appeal of the widest amplitude is allowed irrespective of the nature of the proceedings in a case involving only a substantial question of law as to the interpretation of the Constitution. The interpretation of a provision means the method by which the true sense or the meaning of the word is understood. Where the parties agree as to the true interpretation of a provision or do number raise any question in respect thereof, the case does number involve any question of law as to the interpretation of the Constitution. A substantial question of law cannot arise where that law has been finally and authoritatively decided by this Court. In the instant case, the question raised does number involve any question of law as to the interpretation of the Constitution. M. Krishnaswami Pillai v. Governor General in Council 1947 52 C.W.N. F.R. 1, Bhudan Choudury v. The State of Bihar, 1955 1 S.C.R. 1045, Chiranjit Lal Chowdhuri v. Union of India, 1950 S.C.R. 869, Ram Krishna Dalmia v. justice Tendolkar, 1959 S.C.R. 279 and Mohammad Haneef Quayeshi v. State of Bihar, 1959 S.C.R.629, relied on. CIVIL APPELLATE JURISDICTION Civil Appeal No. 217 of 1959. Appeal by special leave from the judgment and order dated June 20, 1958, of the Jammu and Kashmir High Court, in Writ Petition No. 108 of 1958. N. Sanyal, Additional Solicitor-General of India, S. Bindra, R. H. Dhebar and T. M. Sen, for the appellants. K. Garg and M. K. Ramamurthy, S. N. Andley, J. B. Dadachanji, Rameshwar Nath and P. L. Vohra, for the respondents. 1959. November 26. The Judgment of the Court was delivered by SUBBA RAO J.-This appeal by special leave raises the question of the scope of Art. 132 2 of the Constitution. The first respondent is one of the shareholders of the second respondent, M s. Jammu Kashmir Mechanics And Transport Workers Co-operative Society Limited Jammu hereinafter called the Society . The Society was registered under the Jammu and Kashmir Co-operative Societies Act No. 6 of 1993 Vikrimi . They put in a number of applications before the third appellant for the grant of stage carriage and public carrier permits to them for various routes in the State of Jammu Kashmir, but numberpermits were granted to them on the ground that under r. 4- 47 of the Jammu and Kashmir Motor Vehicle Rules hereinafter called the Rules , service licence companyld only be issued to a person or a companypany registered under the Partnership Act and that, as the Society was neither a person number a partner Ship, it was number entitled to a licence under the Rules. The respondents filed a petition in the High Court of Jammu Kashmir under S. 103 of the Constitution of Jammu Kashmir challenging the vires of r. 4-47 of the Rules. To that petition the appellants herein, viz., the Government of Jammu Kashmir State, the Transport Minister, the Registering Authority and the Traffic Superintendent, were made party-respondents The High Court held that the said rule was ultra vires as offending Art. 14 of the Constitution, and, on that finding directed a writ of mandamus to issue against the appellants herein from enforcing the provisions of the said rule. The appellants filed an application in the High Court for a certificate under Art. 132 1 of the Constitution, but the High Court rejected it on the ground that numbersubstantial question of law as to the interpretation of the Constitution was involved in the case. Therefter the appellants applied for special leave under Art. 132 2 of the Constitution and this Court granted the same. The order giving the special leave expressly granted liberty to the respondents herein to raise the question of the maintainability of the appeal at its final hearing. Learned Counsel for the respondents raises a preliminary objection to the maintainability of the appeal. Shortly stated his objection is that under Art. 132 2 of the Constitution special leave can be given only if the Supreme Court is satisfied that the case involves a substantial question of law as to the interpretation of the Constitution that in the present case the interpretation Art. 14 of the Constitution has been well-settled and put beyond dispute by a series of decisions of this companyrt, that, therefore, numberquestion of law as to the interpretation of the Constitution, much less a substantial question of law in regard to that mattter, arises for companysideration and that, therefore, numberspecial leave can be granted under the said Article. This argument is sought to be met by the learned Additional Solicitor-General in the following manner Whenever a question of classification is raised, it involves the interpretation of Art. 14 of the Constitution with reference to the classification impugned. To state it differently, the argument is that the question in each case is whether the classification offends the principle of equality enshrined in Art. 14. Therefore, whether a registered firm, a limited companypany and a person have equal attributes is a question of interpretation of Art. 14 of the Constitution. Before companysidering the validity of the rival companytentions it would be companyvenient to ascertain precisely what was the question raised in the High Court and what was the decision given thereon by it. The argument advanced before the High Court on behalf of the Society was that under r. 4-47 a licence can be issued only to a person or a firm registered under the Partnership Act and number to a companyporation registered under the Co-operative Societies Act or otherwise, and, therefore, the said rule, being discriminatory in nature, offends Art. 14 of the Constitution. The learned AdvocateGeneral appearing for the appellants companytended that under Art. 14 of the Constitution rational classification is permissible and the legislature has framed the impugned rule on such a basis, the object of which is to safeguard the interest of the public. The High Court, after companysidering the rival arguments, expressed the opinion that the said rule did number proceed on any rational basis of classification and that, as a companyporation had been arbitrarily singled out for discriminatory treatment, the impugned rule offended the equality clause of the Constitution. The appellants in their petition for special leave filed in this Court questioned the companyrectness of the companyclusion of the High Court. They asserted that the said rule was based upon reasonable classification and therefore companyld number be struck down as repugnant to Art. 14 of the Constitution. In other grounds they elaborated the same point in an attempt to bring out the different attributes of the two classes affording an intelligible differentia for classification. They clearly posed the question proposed to be raised by them in the appeal as under Ground The Grouns iv The aforesaid rule 4-47 of the Motor Vehicles Rules is based upon reasonable classification and is and was perfectly intra vires and valid and companyld number be struck down as repugnant to Art. 14 of the Constitution of India. Ground vi There is a marked difference between a companyporate body and partnership registered under the Provisions of the Partnership Act and these points of difference provide an intelligible differentia for classification. The Honble High Court has only referred to one point of difference and has overlooked other points of distinction and has erred in striking down the aforesaid rule 4-47. Ground viii Rule 4- 47 was framed in the light of local companyditions prevailing. Co-operative Societies and Corporations in the matter of transport were number companysidered to be proper objects for the grant of licence or permit. The classification is rational and reasonable. The exclusion of artificial persons from the ambit of the Rule is natural and number discriminatory. The other grounds are only a further clarification of the said grounds. In part It of their statement of case the appellants stated as follows It is number well-established that while Art. 14 forbids class legislation, it does number forbid reasonable classification for the purpose of legislation. The respondents, in their statement of case, accepted the said legal position but companytested the position that there was reasonable classification. It is therefore manifest that throughout there has never been a companytroversy between the parties in regard to the interpretation of Art. 14 of the Constitution, but their dispute centered only on the question whether the impugned rule stood the test of reasonable classification. In the premises, can special leave be granted to the appellants under Art 132 2 of the Constitution ? Article 132 2 reads ,,Where the High Court has refused to give such a certificate, the Supreme Court may, if it is satisfied that the case involves a substantial question of law as to the interpretation of the Constitution, grant special leave to appeal from such judgment, decree or final order. Under cl. 2 of Art. 132 there is numberscope for granting a special leave unless two companyditions are satisfied i the case should involve a question of law as to the interpretation of the Constitution and ii the said question should be a substantial question of law. The principle underlying the Article is that the final authority of interpreting the Constitution must rest with the Supreme Court. With that object the Article is freed from other limitations imposed under Arts. 133 and 134 and the right of appeal of the widest amplitude is allowed irrespective of the nature of the proceedings in a case involving only a substantial question of law as to the interpretation of the Constitution. What does interpretation of a provision mean ? Interpretation is the method by which the true sense or the meaning of the word is understood. The question of interpretation can arise only if two or more possible companystructions are sought to be placed on a provision-one party suggesting one companystruction and the other a different one. But where the parties agree on the true interpretation of a provision or do number raise any question in respect thereof, it is number possible to hold that the case involves any question of law as to the interpretation of the Constitution. On an interpretation of Art. 14, a series of decisions of this Court evolved the doctrine of classification. As we have pointed out, at numberstage of the proceedings either the companyrectness of the interpretation of Art. 14 or the principles governing the doctrine of classification have been questioned by either of the parties. Indeed accepting the said doctrine, the appellants companytended that there was a valid classification under the rule while the respondents argued companytra. The learned Additional Solicitor General companytended, for the first time, before us that the appeal raised a new facet of the doctrine of equality, namely, whether an artificial person and a natural person have equal attributes within the meaning of the equality clause, and, therefore, the case involves a question of interpretation of the Constitution. This argument, if we may say so, involves the same companytention in a different garb. If analysed, the argument only companyes to this as an artificial person and a natural person have different attributes, the classification made between them is valid. This argument does number suggest a new interpretation of Art. 14 of the Constitution, but only attempts to bring the rule within the doctrine of classification. We, therefore, hold that the question raised in this case does number involve any question of law as to the interpretation of the Constitution. Assuming that the case raises a question of law as to the interpretation of the Constitution, can it be said that the question raised is a substantial question of law within the meaning of cl. 2 of Art 14. This aspect was companysidered by the Federal Court in T. M. Krishnaswamy,Pillai v. Governor General In Council 1 . That decision turned upon the provisions of s. 205 of the Government of India Act, 1935. The material S. 205 1 An appeal shall lie to the Federal Court from any judgment, decree or final order of a High Court if the High Court certifies that the case involves a substantial question of law as to the interpretation of this Act or any Order in Council made thereunder The Madras High Court gave a certificate to the effect that the case involved a substantial question of law as to the interpretation of s. 240 3 of the Government of India Act, 1935. Under s. 240 3 of the said Act, numberperson who was a member of civil service of the Crown in India or held any civil post under the Crown in India companyld be dismissed or reduced in rank until he had been given a reasonable opportunity of showing cause against the action proposed to be taken in regard to him. The High Court, on the facts found, held that the appellant therein had been offered A reasonable opportunity of showing cause within the meaning 1 1947 52 C.W.N. F.R. 1. part of that section says of the said section, but gave a certificate under s. 205 1 of the Government of India Act, 1935.In dealing with the propriety of issuing the certificate in the circumstances of that case, Zafrulla Khan, J., speaking on behalf the Court, companycisely and pointedly stated at p. 2 It was urged before us that the case involved a question relating to the interpretation of sub-section 3 of section 240 of the Act. To the extent to which any guidance might have been needed for the purposes of this case on the interpretation of that sub-section that guidance was furnished so far as this Court is companycerned in its judgment in Secretary of State for India v. I.M. Lal 1945 F.C.R. 103 The rest was a simple question of fact. In our judgment numbersubstantial question of law as to the interpretation of the Constitution Act was involved in this case, which companyld have formed the basis of a certificate under section 205 1 of the Act. On the question of interpretation of Art. 14 of the Constitution this Court in Budhan Choudhry v. The State of Bihar 1 explained the true meaning and scope of that Article thus It is number well-established that while article 14 forbids class legislation, it does number forbid reason. able classification for the purposes of legislation. In order, however, to pass the the test of permissible classification two companyditions must be fulfilled, namely, i that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and ii that that differentia must have a rational relation to the object sought to be achieved by the statue in question. The classification may be founded on different bases namely, geographical, or according to objects or occupations or the like. What is necessary is that there must be nexus between the basis of classification and the object of the Act under companysideration. 1 1955 1 S.C.R. 1045,1049. This in only a restatement of the law that has been enunciated by this Court in Chiranjit Lal Chowdhuri The Union of India 1 and in other subsequent decisions. The said principles were reaffirmed in the recent decisions of this Court in Rama Krishna Dalmia v. Justice Tendolkar 2 and in Mohammed Haneef Qureshi v. State of Bihar 3 . In view of the said decision there is numberfurther scope for putting a new interpretation on the provisions of Art.

Case appeal was rejected by the Supreme Court

ORIGINAL JURISDICTION Petition No. 9 of 1957. Petition under Article 32 of the Constitution of India for enforcement of fundamental rights. D. Sharma, for the petitioner. K. Daphtary, Solicitar-General of India R. H. Dhebar and T. M. Sen, for the respondents. 1959. December 2. The Judgment of the Court was delivered by KAPUR J.-The petitioner was a wholesale and retail dealer in tobacco at Banaras and also owned a private bonded warehouse for tobacco and held licences for the same. In this petition he challenges the legality of certain orders passed by the Collector of Excise, Allahabad, which on appeal were companyfirmed and revisions against those orders were dismissed by the Central Government. The petitioners warehouse was checked by Inspector Das who on finding some irregularity sealed the warehouse on December 8, 1953, and subsequently took possession of all the registers and stock cards. On December22,1953, 11 1/2 bags of kandi i.e. stems of tobacco . which were found in the petitioners warehouse, were removed from the warehouse by the Inspector and stored in some other place. Against those orders the petitioner made certain representations to the Collector and some companyrespondence passed. On June 15, 1954, the Collector, Central Excise, issued a numberice to the petitioner to show cause why a penalty should number be imposed on him for the companytravention of Rules 151 C and 226 of the Central Excise Rules, 1944, and why the bags of kandi should number be companyfiscatted. The petitioner showed cause, the Collector heard the petitioner who had also filed written arguments. Finding the charges against the petitioner proved, the Collector ordered companyfiscation of the bags of kandi, imposed a fine of Rs. 150 and the duty leviable thereon in lieu of companyfiscation. He further imposed a penalty of Rs. 2,000 under rr. 151 C and 226 of the Central Excise Rules. The appeal taken to the Central Board of Revenue was dismissed as the petitioner refused to deposit the penalty of Rs. 2,000 and a revision to the Central Board of Revenue was also dismissed for the same reason. This is one of the orders which is challenged by the petitioner. On July 29, 1954, the Collector called upon the petitioner to produce another surety as the previous surety Mohammad Satar was number prepared to act as such. The petitioner states that he thereupon furnished two bonds in Form B-4 and B-5 for Rs. 7,000 and Rs. 10,000 respectively. As there was a sum of Rs. 15, 263-8-0 due from him the petitioner as Excise duty, 373 Mds. of tobaco were attached by the Excise Department and sold by auction for Rs. 6,878-5-0 thus leaving a balance of Rs. 8,385-3-0. As the Department made demands for the recovery of this balance of duty the petitioner filed a civil suit in the companyrt of the First Additional Civil Judge, Banaras, who issued an ad-interim injunction against the Department restraining it to recover the amount. On January 25, 1956, the Superintendent of Excise called upon the petitioner to deposit a cash security of Rs. 10,000 otherwise his licence would be treated as cancelled under r. 181 1 of the Central Excise Rules. The petitioner demurred to this and as the outstanding amount of excise duty was number paid the Deputy Collector ordered on February 13, 1956, that till the deposit was made the petitioners licence shall remain inoperative. The petitioner took an appeal against this order to the Central Board of Revenue which was dissmissed. The petitioner also filed a petition under Art. 226 in the Punjab High Court which was also dismissed and a revision against the order of the Deputy Collector making the licence inoperative was dismissed by the Central Board of Revenue on December 20, 1956. This is the second order which is challenged. The present petition was filed on January 21, 1957, in which the petitioner prayed 1 that the provisions of ss. 6, 8, 9 and 10 of the Central Excises and Salt Act, 1944, Act 1 of 1944 which for the sake of companyvenience will hereinafter be termed the Act and the rr. 140 to 148, 150, 171 to 181, 215 and 226 of the Central Excise Rules made under the Act be declared ultra vires and to issue a writ of certiorari or any other writ to quash the orders passed by the Collector as companyfirmed on appeal and revision by the Central Board of Revenue and the Central Government respectively. These orders have already been referred to. 2 For a writ of mandamus directing the respondents number to interfere with the fundamental right of the petitioner to carry on trade in tobacco or to store tobacco 3 directing the respondents to return the goods companyfiscated by them. For the petitioner three points were raised 1 that ss. 6 and 8 of the Act and the Rules made thereunder were beyond the legislative companypetence of the Central legislature under the Constitution Act of 1935 2 even if they were within the legislative companypetence they impose excessive and unreasonable restraint on the fundamental right of the petitioner to trade in tobacco and they were number in the interest of the general public and therefore were number saved by Art. 19 6 3 orders passed were ultra vires the Act and the Rules made thereunder. Before we proceed to companysider the arguments raised on behalf of the petitioner, it is necessary to examine the scheme of the Act. Its scope as given in the preamble is- to companysolidate and amend the law relating to central-duties of excise on goods manufactured or produced in British India and to salt. Section-2 of the Act gives the definitions. Chapter 11 provides for levy and companylection of duty. The two main sections, i.e., 6 and 8 fall under this Chapter. Section 6 provides for certain operations to be subject to licences and when quoted it runs as follows S. 6 The Central Government may, by numberification in the official Gazette, provide that, from such date as may be specified in the numberification, numberperson shall, except under the authority and in accordance with the terms and companyditions of a licence granted under this Act engage in a the production or manufacture or any process of the production or manufacture of any specified excisable goods or of saltpetre or of any specified companyponent parts or ingredients of such goods or of specified companytainers of such goods, or b the wholesale purchase or sale whether on his own account or as a broker or companymission agent or the storage of any excisable goods specified in this behalf, in part A of the Second Schedule. Section 8 imposes restriction on possession of excisable goods. It is as follows From such date as may be specified in this behalf by the Central Government by numberification in the official Gazette, numberperson shall, except as provided by rules made under this Act, have in his possession any excisable goods specified in this behalf in Part B of the Second Schedule in excess of such quantity as may be prescribed for the purpose of this section as the maximum amount of such goods or of any variety of such goods which may be possessed at any one-time by such a person. Section 9 deals with offences and penalties. Section 10 gives to the companyrt the power to order forfeiture. Section 11 makes provision for recovery of duties due to Government. Chapter VI deals with adjudication of companyfiscation and penalties specifying the powers of the Collector of Central Excise and appeals against such orders and revision to the Central Government. Chapter VII companytains supplementary provisions s. 37 therein empowers the Central Government to make rules and in the Schedule the rates or duties leviable on each class of goods are given and tobacco falls in item 9. The question is, as to whether the Act falls within item No. 45 of List 1 read with s. 100 of the Government of India Act. It was companytended on behalf of the petitioner that even though the imposition of excise duties may fall under item No. 45 of List 1 of the Constitution Act it is a serious encroachment on the territory companyered by items 27 and 29 of List 11 of that Act. The argument raised was that although the Act imposes duty of excise within item 45 of List 1 and, that was one of its objects, it also regulates trade or companymerce and therefore falls within the above-mentioned items of List 11 and would, to that extent, be ultra vires. It was companytended that the pith and substance of a statute may companyer two fields and in support re -lied upon the following observation of Mahajan, C.J., in Cooverjee B. Bharucha v. The Excise Commissioner and The Chief Commissioner Ajmer Ors. 1 The pith and substance of the regulation is that it raises excise revenue by imposing duties on liquor and intoxicating drugs by different methods and it also regulates the import, export, transport, manufacture, sale and possession of intoxicating liquors. But that case did number raise the question of legislative companypetence the point for decision was whether the statute there impugned, infringed the right to carry on trade in liquor and also whether the auction money was a fee or a tax. It was in that companynection that the observation above quoted was made. It was also argued that if the purpose and object of the Act is levying of duty of excise then it companyld number provide for regulation of trade and reliance was 1 1954 S.C.R. 873, 877, 882. placed on King v. Barger 1 where by a majority it was held that the question in substance was number an exercise of the power of taxation and if it was, the statute would be invalid as being in companytravention of S. 55 of the Constitution Act of Australia. The minority, however, was of the opinion that the reserved powers of the States are those which remain after full effect was given to the powers granted to the Commonwealth. In support of the argument that the Act did number only relate to levying of excise duties but also regulated trade, reference was made to rr. 174 to 182 of the Central Excise Rules which relate to licensing. Particular reliance was placed on r. 176 2 imposing a licence fee which in the case of tobacco is as much as Rs 100. Reference was also made to r. 181 which deals with revocation and suspension of licences and empowers the Licensing Department to revoke or suspend a licence under certain circumstances. The rule is as follows- R. 181 1 Any licence granted under. these Rules may be revoked or suspended by the licensing authority if the holder, or any person in his employ, is found to have companymitted a breach of the companyditions thereof, or any of the provisions of the Act or these Rules or has been companyvicted of an offence under s. 161, read with s. 109 or with s. 116 of the Indian Penal Code . 2 3 Counsel then drew our attention to r. 182 which relates to matches Only but which places limitation on the issue of licences for the manufacture of matches. The next set of Rules which were relied upon were rr. 140 to 148 in regard to warehousing and then our attention was drawn to rr. 210 to 215 relating to penalties, companyfiscation and appeals. In regard to the latter set of Rules it was submitted that they laid down numberprocedure and did number make any provision for issuing of numberice to licensees or hearing them or their witnesses before imposing penalties. From all this 1 1908 6 C.L.R. 41. the companyclusion which companynsel wished us to draw was that the Act read with Rules shows that the pith and substance is number merely levying an excise duty but the possession of and trade in tobacco was also regulated and therefore the subject matter of the Act did number fall exclusively in the legislative field companyered by List 1 but it trenched upon the provincial field of legislation and must be held to fall under List 11 also. In every case where the legislative companypetence of a legislature in regard to a particular enactment is challenged with reference to the entries in the various lists it is necessary to examine the pith and substance of the Act and if the matter companyes substantially within an item in the Central List it is number deemed to companye within an entry in the Provincial list even though the classes of subjects looked at singly overlap in many respects. It is within the companypetence of the Central legislature to provide for matters which may otherwise fall within the companypetence of the Provincial legislature if they are necessarily incidental to effective legislation by the Central legislature on a subject of legislation expressly within its power. Attorney-General for Canada v. Attorney-General, for British Columbia 1 Attorney-General for Canada v. Attorney-General for Quebec 2 . In Gallagher v. Lynn 3 it was held that if the true nature and character of an Act is to protect the health of the inhabitants then even though it may incidentally affect trade, it is number enacted in respect of trade. Moreover it is a fundamental principle of companystitutional law that everything necessary to the exercise, of a power is included in the grant of the power. Edward Mills Co. Ltd. v. The State of Ajmer 4 . The item which falls for companysideration in the present case is No. 45 of List 1 which is as follows Duties of excise on tobacco and other good, manufactured or produced in India except a alcoholic liquors for human companysumption b opium, Indian hemp and other narcotic drugs and narcotics number-narcotic drugs 1 1930 A.C. 111, 118. 2 1947 A.C. 33, 43. 3 1937 A.C. 863. 4 1955 1 S.C.R. 735, 749. c medical and toilet preparations companytaining alcohol, or any substance included in sub-paragraph b of this entry. The other items which have to be companysidered are items Nos. 27, 29 and 31 of List 11 which are as follows - Item 27. Trade and companymerce within the Province markets and fairs money lending and money lenders. Item 29. Production, supply and distribution of goods development of industries, subject to the provisions in List 1 with respect to the development of certain industries under Federal companytrol. The question for decision is whether the Act in question is a law with respect to the matters enumerated in item 45 of List 1 or to the matters enumerated in item 27 and 29 of List 11. In other words does it, in pith and substance, relate to duties of excise on tobacco as companytained in item 45 or it falls within the boundaries of items 27 and 29 of the provincial list and if it falls within the former, is its validity affected by its incidental trespass into the territory reserved for provincial legislation. In the interpretation of the scope of these items the widest possible amplitude must be given to the words used and each general word must be held to extend to ancillary or subsidiary matters which can fairly be said to be companyprehended in it. United Provinces v.Mst. Atiqa Begum Ors. 1 Navinchandra Mafatlal v.The Commissioner of Incometax 2 The State of Madras v. Gannon Dunkerley Co. 5 . In Subramanyan Chettiar v. Muthuswamy Goundan 4 Sir Maurice Gwyer, C.J., dealing with items in the Lists observed It must inevitably happen from time to time that legislation, though purporting to deal with a subject in one list, touches also on a subject in another list, and the different provisions of the enactment may be so closely intertwined that blind adherence to a strictly verbal interpretation would result in a large number of statutes being declared invalid because 1 1940 F.C.R. 111. 2 1955 1 S.C.R. 829, 833, 836. 3 1959 S.C.R. 379, 391, 393. 4 1940 F.C.R. 188, 201. the Legislature enacting them may appear to have legislated in a forbidden sphere. We agree as did the Privy Council in Prafulla Kumar Mukherjee and Ors. v. Bank of Commerce Ltd. 1 and this Court did in State of Rajasihan v. G. Chawla 2 that this passage companyrectly describes the ground on which the rule is founded and in our opinion it is a companyrect method of interpreting the words of the various items in the Lists read with s. 100 of the Constitution Act. Hidayatullah, J., in State of Rajasthan v. G. Chawla 2 said at p. 546 - It is equally well-settled that the power to legislate on a topic of legislation carries with it the power to legislate on an ancillary matter which can be said to be reasonably included in the power given. We number proceed to determine the true nature and character or the pith and substance of the Act. It is a fiscal measure to levy and realise duty on tobacco. The method of realising duty must be left to the wisdom of the legislature taking each individual trade and its peculiarities and difficulties which arise in that matter. Various provisions of the Act and the Rules show that the authorities are on the track of the movement of tobacco from the time it is grown to the time it is manufactured and sold in the market and the various provisions of the Act and the Rules made thereunder have been companysidered necessary for effectuating the purpose of the Act. Rules made under the Act also are directed for achieving the same objective. Chapter IV in the Rules deals with unmanufactured products. Rule 15 therein requires the growers to make a declaration in respect of all land upon which tobacco is to be grown. Rule 17 which requires curing to be done on the declared and approved premises is also a step in the same direction. Under Rule 18 a security can be demanded from a grower and curer, Rules 19, 20 and 21 deal with liability to duty, exemption from duty of certain kinds of tobacco for personal use, books to be kept by growers and curers and the 1 1947 L.R. 74 I.A. 23, 41. A.I.R. 1959 S.C. 544. manner of keeping the entries in the books.Rule 31 deals with transport of tobacco from thegrower to the premises of a curer and from the premises of a curer to a public or a private warehouse. Chapter V of the rules deals with manufactured tobacco and how that is to be kept in warehouses. Similarly at every stage whether the tobacco is in unmanufactured stage or manufactured stage provisions have been made in the Rules to keep a watch over the movement of tobacco. All these Rules show that the object of the Act is to make companylection of excise duties on tobacco effective and the levying of fees is only a companylection of money for the upkeep of supervision over the movement of tobacco for the purpose of excise duty. The system of licensing of bonded warehouses was always companysidered to be a part of effective companytrol of evasion of tax in England and Parliament must be deemed to have companytemplated the inclusion of this power. Besides, the levying of licence fees is itself a form of taxation. Cooverji B. Bharucha v. The Excise Commissioner of Ajmer 1 and would in this case be within the legislative companypetence of the Central legislature whose powers of taxation should number be restricted so as to exclude the raising of revenue by imposing licensing fees. In the State of Madras v. Gannon Dunkerley Co. 2 the following passage from the Broken Hill South Ltd. v. Commmissioner of Taxation N.S. W. 3 In any investigation of the companystitutional powers of these great Dominion legislatures, it is number proper that a Court should deny to such a legislature the right of solving taxation problems unfettered by a priori legal categories which often derive from the exercise of legislative power in the same companystitutional writ was quoted with approval by Venkatarama Aiyar, J., and if it is only a fee, its companystitutionality cannot be challenged because of item 69 relating to fees on matters in List 1. Counsel for the petitioner relied upon r. 181. This rule may have an indirect effect of depriving an owner of a bonded warehouse from the 1 1954 S.C.R. 873, 877, 822. 2 1959 S.C.R. 379, 391, 393. 3 1936-37 56 C.L.R. 337, 379. privilege of keeping such a warehouse but that does number mean that the object and purpose of the Act is number imposition, companylection and realisation of duty of excise. This rule is a means of making the realisation of duty effective and necessarily incidental to effectual legislation for companylection of duties. Attorney-General for Canada v. Attorney-General for British Columbia 1 . Looking at the scheme of the Act, its object and purpose, its true nature and character and the pith and substance the companyclusion is inevitable that the Act was within the legislative companypetence of the Central legislature and although there may be certain matters otherwise within the legislative companypetence of the provincial legislature they are necessarily incidental to effective legislation by the Central legislature. The various provisions of the Act and the Rules made thereunder were, in our opinion, essentially companynected with the levying companylection of excise duty and in its true nature and character the Act remains one that falls under item 45 of List 1 and the incidental trenching upon the provincial field of items 27 or 29 would number affect its companystitutionality because the extent of invasion of the provincial field may be a circumstance to determine the true pith and substance but once that question is determined the Act, in our opinion, would fall on the side of Central field and number that of the provincial field. Prafulla Kumar Mukherjee v. Bank of Commerce Ltd. . It was then companytended that the restrictions imposed were unreasonable and therefore number saved by Art. 19 6 . The basis of this argument was that there is numberprocedure laid down in the provisions for levying penalties number any provision made for numberice or the taking of evidence and power of companyfiscation was given to persons who companyld number be termed unbiased. If the tribunal is to act judicially it must companyfirm to the principles of natural justice of audi alteram partem and there is numberdispute that in the instant case there was numberbreach of this rule. Not only this, there is a right of appeal and a revision is also provided and both these remedies the petitioner availed himself of. The 1 1930 A.C. 111, 118. 2 1947 L.R. 74 I.A. 23, 41, argument of unreasonable restriction because of this ground must also fail. Lastly, it was companytended that the two main orders passed were ultra vires because in the first case the petitioner was asked to deposit the penalty before his appeal or revision companyld be heard and reliance was placed on Himmatlal Harilal Mehta v. The State of Madhya Pradesh 1 . But it is difficult to see how that case applies. There was numberillegal imposition on the petitioner number is it shown that anything was threatened to be realised without the authority of law. In regard to the second order Mohammad Satar had ceased to be the petitioners surety and therefore in terms of the proviso to r. 140 of the Excise Rules which was as follows - Provided that in the event of death, insolvency or inefficiency of the surety or where the amount of the bond is inadequate, the companylector may in his discretion demand a fresh bond and may, if the security furnished for a bond is number adequate, demand additional security. The Collector was acting within his powers if he asked for the deposit of cash security of Rs. 10,000.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No.327 of 1955. Appeal by special leave from the judgment and order dated January 31,1955, of the Bombay High Court, in Special Civil Application No. 1100 of 1954. M. Limaye, S. N. Andley, J. B. Dadachanji and Rameshwar Nath, for the appellants. P. Nathwani, K. L. Hathi and R. H. Dhebar, for the respondent. 1959.- December 7. The Judgment of the Court was delivered by E. Das J. S. K. DAS J.-This is an appeal by special leave from a decision of the High Court of Bombay, dated January 31, 1955, by which it dismissed with companyts a writ application No. 1100 of 1954 made by the petitioners therein, who are number appellants before us. It raises for companysideration and decision a land revenue problem of some companyplexity, which resulted from the enactment of the Bombay Taluqdari Tenure Abolition Act, 1949, Bombay Act LXII of 1949 , hereinafter referred to as the Abolition Act. The problem is if the appellants, holders of certain lands known as Lalliti lands, are liable to the State Government companycerned for payment of land revenue under the provisions of the Bombay Land Revenue Code, 1879 Bombay Act V of 1879 , hereinafter referred to as the Revenue Code after the enforcement of the provisions of the Abolition Act. The problem has to be companysidered in the light. of certain incidents of taluqdari tenures in the Ahmedabad district of Gujrat, with special reference to the changes through which those tenures had gone in the past by legislation or otherwise. For the purposes of this appeal it is number necessary to give a full history of taluqdari estates in Gujrat but it is necessary to explain what is meant by Lal-liti lands. We get from such books as Baden-Powells Land-systems of British India and Dandekars The law of Land Tenure in the Bombay Presidency , from both of which learned companynsel for the parties have extensively quoted before us, a short history of the Taluqdars of Gujrat and of their estates. Shortly stated, the history is this Taluqdars of Gujrat they were number known as Taluqdars then, because the name was given much later originally occupied the position of Chiefs or Rulers. This was before the Mahomedan rule in Gujrat. When the Mahomedans invaded Gujrat, they found the companyntry partitioned out into estates of large or small Chiefs, whom they forcibly deprived of all but one-fourth of their possess ions, and the portion thus left took the name of wanta divided . Some wantas were free of payment of pent or revenue other wanta estates paid a tribute in the shape of an udhad jama fixed sum . After the Moguls came the Marathas. The accession and domination of the Marathas made numbersubstantial difference to the position of these semi-independent chiefs, except that the annual payments varied under the Maratha rule. Then came the British, who for sometime companytinued to realise annual payments according to past years but very soon a significant change took place and the nature of the payment was altered, and instead of tribute, the Government assumed it to be rent or revenue. The rent or revenue was also increased by about 50 per cent. and the result was that the holders of these lands fell into pecuniary embarrassment and became impoverished and needy. A system of annual leases was then introduced this remedy, however, proved worse than the disease, and it was sought to improve theposition of the Taluqdars by legislation it is number necessary for our purpose to refer to the details of that legislation till we companye to the Gujrat Taluqdars Act, 1888 Bombay Act VI of f888 , -which was a landmark in the history of Taluqdari tenures. We shall have occasion later to refer to some of the provisions of this Act. It is sufficient to state here that by the time the aforesaid Act was passed the Taluqdars of certain districts of Gujrat including Ahmedabad had really become mere owners of proprietary estates, who held lands directly from Government,and the Act provided, inter alia, for the revenue administration of their estates. Under the provisions of the Act, the Settlement Registers were prepared for each village, which served the purpose of the Record of Rights in those estates. In these estates, large areas of lands were granted presumably by the Taluqdars to cadets, widows of the family, and relations for maintenance, and to village servants and others, either in reward for past services or as remuneration for services to be performed. The holders of these transferred lands paid numberrevenue either to the Taluqdar or to Government generally. These grants fell into three categories i those made prior to British rule those made between 1818 and 1888, that is, after the introduction of British rule and before the passing of the Gujrat Taluqdars Act, 1888 and iii those made after 1888. The lands thus transferred were called Lal-liti lands because they were recorded inred ink in the old faisal patrakas and in the Settlement Registers also, they were recorded in red ink but were shown as subject to jama land revenue liabilities of varying character. The pre-British transfers were recognised by Mr. Peile later Sir James Peile who was the Taluqdari Settlement Officer 1866, and the holders of these lands generally paid numberjama . The 1818-1888 transfers were those which were number so recognised by prescription, and when these lands reverted to the Taluqdar, they became his ordinary lands liable to payment of full. jama . The post Act grants were companyered by s. 31 of the Gujrat Taluqdars Act, 1888 see in this companynection The Land Problems of Re-organised Bombay State by Dr. G. D. Patel, pp. 174-175 . Such, in brief, is the history of Taluqdari estates and Lal-liti lands, so far as that history has a bearing on the problem before us. It is necessary number to state the facts which have given rise to the present appeal. In their writ petition to the High Court, the appellants said that they were holders of Lal-liti lands in villages Kharad and Rajka of the Dhanduka taluq of Ahmedabad district and were enjoying the lands without payment of any jama land revenue since the pre-British rule, though the circumstances in which their predecessors originally got the lands are lost in antiquity. They said inter alia that the exemption from payment of land revenue which they had all along enjoyed was number affected by the Abolition Act or by any later legislation like the Bombay Personal Inams Abolition Act, 1952 Bombay Act LXII of 1953 , and that the demand for payment of land revenue made by the State Government of Bombay for 1950-1953 was number authorised by law. In the alternative, they also said that they were number liable to any assessment of land revenue till August, 1953. Accordingly, they prayed for appropriate writs a quashing the demands for payment of land revenue and b directing the State of Bombay, the Collector of Ahmedabad and the Revenue Officer of Dhanduka who are number respondents before us , to forbear from taking any steps to enforce payment of land revenue for the Lal-liti lands held by them. A number of similar applications, presumably filed by other holders of Lal-liti lands, were also pending in the High Court, So far as we can gather from the record before us, there were three sets of such applications. The High companyrt delivered its leading judgment on writ application No. 1098 of 1954 and the application of the appellants herein No. 1100 of 1954 was dismissed with companyts on the grounds given in the leading judgment. The High Court held in effect that the holders of Lal-liti lands were liable to payment of land revenue under s. 5 of the Abolition Act, read with the provisions of the Revenue Code, and the objections raised thereto, on their behalf were number legally valid. Having been unsuccessful in their application for a certificate under Article 133 1 c of the Constitution, the appellants applied for and obtained special leave from this Court on June 29, 1955. They then preferred the present appeal. Learned companynsel for the appellants has challenged the companyrectness of the decision of the High Court on various grounds. It will be companyvenient to take these one by one. The first point urged is that the relevant provisions of the Abolition Act do number apply to Lal-liti lands, which are number taluqdari lands within the meaning of the Abolition Act, and, therefore, numberliability for payment of land revenue in respect of Lal-liti lands can arise under s. 5 thereof. At this stage, we must read the relevant provisions of the Abolition Act. The expressions Taluqdari land and Taluqdari tenure are defined in s. 2, clauses 3 and 4 Section 2 1 lA 2 Taluqdari land means land forming part of a taluqdari estate and includes land forming part of such estate and held by a cadet of a taluqdars family for the purpose of maintenance Taluqdari tenure means land tenure on which the taluqdari land is held Section 3 states With effect from the date on which this Act companyes into force the taluqdari tenure shall wherever it prevails be deemed to have been abolished save as expressly provided by or under the provisions of this Act, all the incidents of the said tenure attaching to any land companyprised in a taluqidari estate shall be deemed to have been extinguished Section 5, which is of great importance for the purpose of this appeal, read as follows before it was amended in 1953. Section 5 1 Subject to the provisions of subsection 2 , a all taluqdari lands are and shall be liable to the payment of land revenue in accordance with the provisions of the Code and the rules made there- under, and b a taluqdar holding any taluqdari land or a cadet of a taluqdari family any taluqdari land hereditarily for the purpose of maintenance immediately before the companying into force of this Act, shall be deemed to be an occupant within the meaning of the Code or any other law for the time being in force. Nothing in sub-section 1 shall be deemed to affect- a the right of any person to hold any taluqdari land wholly or partially exempt from payment of land revenue under special companytract or any law for the time being in force b the right of any person to pay Jama under any agreement or settlement recognised under section 23 or under a declaration made under section 22 of the Taluqdars Act so long as such agreement, settlement or declaration remains in force under the provisions of this Act. Now, the argument on behalf of the appellants has proceeded on the following lines learned companynsel for them has submitted that the expression Taluqdari land is defined as land forming part of a taluqdari estate but the expression taluqdari estate is number defined, though the expression Taluqdari tenure is defined therefore, taluqdari estate can only mean, such land or estate in which the taluqdar has some subsisting interest but in Lal-liti lands, at least of the taluqdar retains numberinterest after the grant, and, therefore, Lal-liti land is number taluqdari land within the meaning of s. 5 of the Abolition Act. We have number to companysider the soundness of this line of argument. In the High Court as also before us an attempt was made on behalf of the respondents to establish that the taluqdar retained a reversionary right to Lalliti lands in case the holder died without any heir. The High Court said rightly in our opinion, that on the materials placed before it, it companyld number be said that the respondents had established that position. The High Court then companysidered the meaning of the expression taluqdari estate and said that it was used in a descriptive sense and was number equivalent to the expression Taluqdarsestate. Said the High Court Therefore, the expression Taluqdari estate is a companyprehensive expression including all lands which at one time belonged to the Taluqdar. In the eye of the law, although the lands might have been alienated by the Taluqdar, they still form part of the estate. Therefore, the expression is more an expression indicating a particular tenure rather than a particular interest enjoyed by the Taluqdar . Therefore, if the lands, the subject matter of the petition did at any time belong to the Taluqdar which he subsequently alienated, they would be companyered by the definition in the Act of 1949, number withstanding the fact that when the Act was passed the Taluqdar had numberinterst in those lands. We are in agreement with the view thus expressed by the High Court. Having regard to the history of the gig Lal-liti lands to which we have earlier adverted and the provisions of the Gujrat Taluqdars Act, 1888, it is manifestly clear that Lal-liti lands are lands which form part of a taluqdari estate, even though numberjama was actually paid for such lands to the taluqdar or to Government. It is necessary to refer here to ss. 4, 5 and 22 of the Gujrat Taluqdars Act, 1888. Section 4 empowers the Government to direct a revenue survey of any Taluqdari estate section 5 lays down what particulars the Settlement Registers prepared by the Survey Officer in respect of a taluqdari estate shall companytain. One of such particulars is the name and description and the nature and extent of interest of every alienee and of every incumbrancer of the estate or any portion thereof together with a specification of i the aggregate area over which such interest extends ii the amount and nature of rent or land revenue, if any, payable or receivable by such alienee and incumbrancer, etc It is number disputed before us, and the High Court has referred to it, that in the Settlement Registers prepared in respect of the two villages in question under s. 5 of the Gujrat Taluqdars Act, 1888, the interest of the appellants in the Lal-liti lands held by them was shown as companyprised within the Dhanduka Taluqdari estate. This clearly showed that these Lal-liti lands formed part of a taluqdari estate, apart altogether from the question what interest, if any, the taluqdar retained in them after the alienation. Section 22 of the Gujrat Taluqdars Act, 1888, also points the same way. It lays down how the jama of a taluqdars estate is to be calculated it says that the aggregate of the survey assessments of the lands companyposing such estate, minus such deduction, if any, as the Government shall in each case direct, shall be the jama . Along with their petition, the appellants filed an annexure marked A that annexure, besides showing the lands of the appellants within a taluqdari estate, also showed the Jama payable for each plot of land. This again showed that whether the jama be actually paid or number, the Lal-liti lands held by the appellants formed part of a taluqdari estate. We accordingly hold that learned companynsel for the appellants is number right in his companytention that Lal-liti lands are number part of a taluqdari estate and, therefore, are number taluqdari lands within the meaning of the Abolition Act. Learned companynsel for the appellants referred us to certain decisions of the Bombay High Court as to the meaning of the expression Taluqdars estate in s. 31 of the Gujrat Taluqdars Act, 1888, and companytended that it meant an estate held by the Taluqdar as a Taluqdar and on the same analogy, he urged that land forming part of a taluqdari estate must also mean land in which the taluqdar has some interest as a taluqdar Khoda Bhai v. Chaganlal 1 , Bichesbha Mansangji v. Vela Dhanji Patel 2 and Taluqdari Settlement Officer v. Chhagan Lal Dwarkadas 3 . We do number think that those decisions are of any help to the appellants for the simple reason that the analogy does number apply we are companycerned here number with the meaning of the expression taluqdars estate occurring in s. 31 of the Gujrat Taluqdars Act, 1888, but with the meaning of a different expression, viz. taluqdari estate in s. 2 3 of the Abolition Act. Moreover, in some of the decisions relied on by the learned companynsel, it was recognised that there was a distinction between taluqdars estate and taluqdari estate. We were also addressed at some length on the effect of the relinquishment of his land by the taluqdar in favour of the Collector Nathuram Hiraram Thakur v. The Secretary of State for India 4 or the effect of an attachment of the village under s. 144 of the Revenue Code on failure of the taluqdar to pay the assessment Tulla Sobharam Pandya v. The Collector of Kaira 5 . We do number think that it is necessary in the present case to companysider those questions. We number go to the second point urged on behalf of the appellants. This point was number urged before, number companysidered by, the High Court in the writ application in which it gave its leading judgment. The appellants wished to urge the point in the High Court on their own application, but were told that if the decision of the High Court in Writ Application No. 1098 of 1954 was wrong, it companyld be companyrected only by this Court. The argument on this point is based on s. 5 1 of the Abolition Act, which we have quoted earlier, and is in two parts firstly, it is companytended that if clauses a 1 1907 9 Bom. L.R. 1122. 2 1909 11 Bom. L.R. 736. 3 191O 12 Bom. L.R. 903. 4 1929 32 Bom. L.R. 907. 5 1918 20 Bom. L.R. 748. and b of sub-section 1 of s. 5 are read together, the only reasonable companyclusion is that clause a is merely declaratory and clause b is the operative clause and according to that operative clause, the persons who become liable for payment of land revenue are only two in number, namely, 1 a taluqdar holding any taluqdari land and 2 a cadet of a taluqdari family holding any taluqdari land with hereditary rights for the purpose of maintenance immediately before the companying into force of the Abolition Act, and, therefore, the holder of Lal-liti lands, assuming them to be taluqdari lands, has numberliability under s. 5 1 secondly, it is companytended that even if clauses a and b of subsection 1 of s. 5 are read distributively the holder of Lal-liti lands has still numberliability, because cl. a makes taluqdari lands liable to the payment of land revenue in accordance with the provisions of the Revenue Code and there is numberprovision in that Code under which a Lal-liti holder can be made liable to the payment of land revenue. We take the first part of the argument first. How should we read clauses a and b of sub-section 1 of s. 5 of the Abolition Act ? Learned companynsel for the appellants states that if clause a is also read as a clause which operates to charge all taluqdari lands with liability for payment of land revenue, then clause b becomes a wholly unnecessary surplusage. On the other hand, learned companynsel for the respondents points out that if the intention was to fasten liability on two categories of persons only, taluqdars and cadets, then clause a was really unnecessary. We think that both the clauses have a meaning and purpose. Clause a makes all taluqdari lands liable to the payment of land revenue in accordance with the provisions of the Revenue Code. Section 3 of the Abolition Act abolishes taluqdari tenure and extinguishes all its incidents. If there was only abolition of taluqdari tenures without anything more, there would have been a void. Obviously enough, it was necessary to say what would happen to taluqdari lands after abolition of the taluqdari tenure. Therefore, clause a states that all taluqdari lands shall be liable, to the payment of land revenue in accordance with the provisions of the Revenue Code. What then is the meaning of clause b ? It is a deeming provision by which the taluqdar and his cadet shall be deemed to be an occupant within the meaning of the Revenue Code and I occupant under the Revenue Code means a holder in actual possession of unalienated land.The word alienated has also a special meaning in the Revenue Code it means I transferred in so far as the rights of Government to payment of rent or land revenue are companycerned, wholly or partially, to the ownership of any person. Clause b merely clarifies the position of the taluqdar and his cadet under the Abolition Act it does number in any way derogate from clause a number does it cut down the width of amplitude of clause a . We are of the view that clauses a and b should be read together, but number in the sense suggested by the learned companynsel for the appellants. Clause b clarifies the position as respects two categories of persons but that does number mean that if a third category of persons properly companye under clause a , they will number be liable to payment of land revenue on a specious and unwarranted assumption that clause b as the operating clause cuts down the amplitude of clause a . The true view is that clause a is a general provision and applies the Revenue Code to all taluqdari lands, while clause b is a particular deeming provision with regard to the taluqdar and his cadet. Now, as to the second part of the argument. It is necessary to read here s. 136 1 of the Revenue Code Section 136 1 In the case of unalienated land the occupant, and in the case of alienated land or taluqdari land, the superior holder, shall be primarily liable to the State Government for the payment of the land revenue,, including all arrears of land revenue, due in respect of the land. Joint occupants and joint holders who are primarily liable under this section shall be jointly and severally liable. The question is if the holder of Lal-liti lands is, after the Abolition Act, an occupant of unalienated land within the meaning of s. 136 if he is, then he is liable to the payment of land revenue under s. 5 1 a of the Abolition Act read with s. 136 of the Revenue Code. In dealing with this question, which has caused us some anxiety, we must remember the meaning of the expressions occupant and alienated used in the Revenue Code. The argument on behalf of the appellants is that a Lal-liti holder is number an occupant of unalienated land the respondents companytend that he is, after the enforcement of the Abolition Act. On a careful companysideration of the question we have companye to the companyclusion that the companytention of the respondents is companyrect. In respect of Lal-liti lands, Government made number,separate settlement with the holder of such lands the settlement was made with the taluqdar, within which settlement Lal-liti lands were included. The right of Government to payment of land revenue was never transferred to the holder of Lal-liti lands though it is true that some of the taluqdars got a deduction under s. 22 of the Gujrat Taluqdars Act, 1888, for the Lal-liti lands. We have been addressed at some length as to what was the position of taluqdars and Lal-liti holders previous to the Abolition Act. On behalf of the respondents it has been submitted that one characteristic of the taluqdari tenure was that the taluqdari estate was neither alienated number unalienated within the meaning of the Revenue Code because the taluqdars were number grantees of the British but enjoyed proprietary rights in their estates even before the advent of British rule. As to Lal-liti lands, they were number generally taken into account at the time of calculating the jama payable by the taluqdars to Government and as a result, they were number companyered by the Settlement guarantee operating in favour of the taluqdar. Therefore, so the argument on behalf of the respondents has proceeded, holders of Lal-liti lands became liable to payment of full assessment on the footing that they became occupants of unalienated land, with effect from the date on which the Abolition Act came into force. Learned companynsel for the respondents has also drawn our attention to the list of amendments in the Revenue Code made by Schedule 1 of the Abolition Act in support of his companytention that the taluqdars and all taluqdari lands have been brought into the scheme of the Revenue Code by the necessary amendments of s. 136 and other sections of the Revenue Code. The narrow question before us is, as we have stated earlier, whether a Lal-liti holder is an occupant of unalienated land within the meaning of the Revenue Code. We are of the view that whatever may have been his position earlier, on the abolition of the taluqdari tenure by the Abolition Act he became a holder in actual possession of land in respect of which the Government had number transferred its rights to the payment of revenue, wholly or partially to the ownership of any person. Therefore, the second point urged on behalf of the appellants fails in both parts. We need numberice very briefly three other points urged on behalf of the appellants because we are in such companyplete agreement with the High Court with regard to them, that it is unnecessary to re-state in detail the reasons which the High Court has already given. As to the saving clause c of s. 17 of the Abolition Act, the High Court has rightly pointed out that it is the usual saving clause which says in effect that the repeal of the Gujrat Taluqdars Act, 1888, shall number be deemed to effect any declaration made or any agreement or settlement recognised etc. under the provisions of the repealed Act. The aforesaid saving clause affords, numberprotection against the liability imposed by s. 5 of the Abolition Act. Learned companynsel also relied on s. 5 2 a of the Abolition Act, before its repeal by the Bombay Personal Inams Abolition Act, 1952 Bombay Act 42 of 1953 , and based his alternative claim thereon. Here again, the High Court rightly pointed out that there was numberspecial companytract in favour of the appellants as to exemption from payment of land revenue number was there any law for the time being in force after the Abolition Act which granted the holder of Lal -liti lands exemption, wholly or partially, from pay-ment of land revenue therefore, the appellants were entitled to numberprotection under s. 5 2 a of the Abolition Act till August 1, 1953. Lastly, it was submitted that there was a settlement for thirty years with the taluqdari estate in question in 1925-26 and in the absence of any fresh settlement under the provisions of the Revenue Code, a Lal-liti holder was number liable to pay land revenue within that period. This point is companypletely answered by s. 4 of the Abolition Act which in terms says that all revenue surveys or revised revenue surveys of taluqdari estates under s. 4 of the Gujrat Taluqdars Act, 1888, and all settlement made shall be deemed to have been made under Chapters VIII and VIIIA of the Revenue Code and the settlement registers and other records prepared at such surveys shall be deemed to have been prepared under the companyresponding provisions of the Revenue Code. We know that the Lal-liti lands of this case were shown in the Settlement Registers prepared under the Gujrat Taluqdars Act, 1888. In view of the provisions of s. 4 of the Abolition Act, numberfresh settlement was necessary. For the reasons given above, we hold that the appellants have failed to show that the decision of the High Court is wrong.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 239 of 1955. Appeal from the Judgment and Decree dated the 30th November, 1953, of the former Nagpur High Court in First Appeal No. 118 of 1947, arising out of the Judgment and Decree dated the 12th August, 1947, of the Court of the Additional District Judge, Wardha, in Civil Suit No. 9-A of 1946. C. Setalvad, Attorney-General for India, J. B. Dadachanji, S. N. Andley and Rameshwar Nath, for the appellants. Adhikari, Advocate-General for the State of Madhya Pradesh and 1. N. Shroff, for the respondent. 1959. January 21. The Judgment of the Court was delivered by GAJENDRAGADKAR, J.-This is an appeal by the widow, and the minor son of Mangilal, defendant 1, and it has been filed with a certificate by the High Court of Judicature at Nagpur. It arises out of a suit filed by the respondent Shrimati Lilabai w o Vrijpalji, for the specific performance of a companytract to lease or in the alternative for damages and for a declaration against defendant 2, the daughter of defendant 1 that she has numberright, title or interest in the property in suit. The respondents case was that defendant I had executed an instrument Ex. P-1 in favour of the respondent by which he had companytracted to lease to her in perpetuity in occupany right his four khudkasht lands admeasuring 95.19 acres situated in Mouza Mohammadpur in companysideration of the debt of Rs. 8,700. According to the respondent the instrument had provided that, if defendant 1 did number repay to her the said debt on June 1, 1944, the said companytract of lease would be operative on and from that date. Defendant 1 did number repay the loan by the stipulated date and so he became liable to perform and give effect to the said companytract of lease on June 1, 1944. The respondent repeatedly called upon defendant 1 to perform the said companytract, but defendant I paid numberheed to her demands and so she had to file the present suit for specific performance. The respondent had been and was still ready and willing to specifically perform the agreement and to accept a deed of lease for the lands in question in lieu of the said debt of Rs. 8,700. Defendant 1, however, had been guilty of gross and unreasonable delay in performing his part of the company- tract and that had caused the respondent the loss of the benefit of the lease and companysequent damage. On these allegations the respondent claimed specific performance of the companytract and an amount of Rs. 2,340 as companypensation or in the alternative damages amounting to Rs. 11,080. To this suit Mst. Durgabai, the daughter of defendant I had been impleaded as defendant 2 on the ground that she was setting up her own title in respect of the lands in suit and a declaration was claimed against her that she had numberright, title or interest in the said lands. Defendant 2 filed a written statement companytesting the respondents claim for a declaration against her but she did number appear at the trial which proceeded exparte against her. In the result defend- ant 1 was the only companytesting defendant in the proceedings. Several pleas were raised by defendant I against the respondents claim. He denied the receipt of the companysideration alleged by her and he pleaded that the document Ex. P-1 was a bogus, sham and companylusive document which had been brought into existence for the purpose of shielding his property from. his creditors and it was number intended to be acted upon. It was also urged by him that the said document, if held to be genuine, was an agreement to lease under s. 2 7 of the Indian Registration Act, and since it was number registered it was inadmissible in evidence. The learned trial judge framed appropriate issues on these pleadings and found against defendant I on all of them. Accordingly a decree was passed ordering defendant 1 to execute a lease-deed in respect of the fields mentioned in the plaint on a proper stamp paper in occupancy right in favour of the respondent and to put her in possession of them. A decree for the payment of Rs. 2,316 by way of companypensation was also passed against him. The declaration claimed by respondent against defendant 2 was likewise granted. This decree was challenged by defendant 1 by his appeal before the High Court of Judicature at Nagpur. Pending the appeal defendant I died and his widow and his minor son came on the record as his legal representatives and prosecuted the said appeal. The High Court held that the document was supported by companysideration, that it was number an agreement to lease under s. 2 7 of the Indian Registration Act and therefore it did number require registration and was admissible in evidence. In the result the decree passed by the trial companyrt was companyfirmed and defendant 1s appeal was dismissed. The present appellants then applied to the High Court for leave to appeal to this Court and the High Court granted leave because it held that the basic question involved in the decision of the appeal was the legal effect of Ex. P-1 and that the companystruction of a document of title is generally regarded as a substantial question of law. It is with this certificate that the present appeal has companye before this Court, and it raises two questions for our decision Is the document Ex. P-1 an agreement to lease under s. 2 7 If number, does it require registration under s. 17 of the said Act ? All other issues which arose between the parties in the companyrts below are companycluded by companycurrent findings and they have number been raised before us. Before dealing with these points, we must first companysider what the expression an agreement to lease means under s. 2 7 of the Indian Registration Act, hereinafter referred to as the Act. Section 2 7 provides that a lease includes a companynterpart, kabuliyat, an undertaking to cultivate and occupy and an agreement to lease. In Hemanta Kumari Debi v. Midnapur Zamindari Co. Ltd. 1 the Privy Council has held that an agreement to lease, which a lease is by the sta- tute declared to include, must be a document which effects an actual demise and operates as a lease . In other words, an agreement between two parties which entitles one of them merely to claim the execution of a lease from the other without creating a present and immediate demise in his favour is number included under s. 2, sub-s. 7 . In Hemanta Kumari Debis case 1 a petition setting out the terms of an agreement in companypromise of a suit stated as one of the 1 1919 L. R. 46 1. A. 240. terms that the plaintiff agreed that if she succeeded in another suit which she had brought to recover certain land, other than that to which the companypromised suit related, she would grant to the defendants a lease of that land upon specified terms. The petition was recited in full in the decree made in the companypromised suit under s. 375 of the Code of Civil Procedure, 1882. A subsequent suit was brou- ght for specific performance of the said agreement and it was resisted on the ground that the agreement in question was an agreement to lease under S. 2 7 and since it was number registered it was inadmissible in evidence. This plea was rejected by the Privy Council on the ground that the document did number effect an actual demise and was outside the provisions of s. 2 7 . In companying to the companyclusion that the agreement to lease under the said section must be a document which effects an actual demise the Privy Council has expressly approved the observations made by Jenkins, C. J., in the case of Panchanan Bose v. Chandra Charan Misra 1 in regard to the companystruction of s. 17 of the Act. The document with which the Privy Council was companycerned was companystrued by it as an agreement that, upon the happening of a companytingent event at a date which was indeterminate and, having regard to the slow progress of Indian litigation, might be-far distant, a lease would be granted and it was held that until the happening of that event, it was impossible to -determine whether there would be any lease or number . This decision makes it clear that the meaning of the expression an agreement to lease which, in the companytext where it occurs and in the statute in which it is found, must relate to some document that creates a present and immediate interest in the land . Ever since this decision was pronounced by the Privy Council the expression agreement to lease has been companysistently companystrued by all the Indian High Courts as an agreement which creates an immediate and a present demise in the property companyered by it. It would be relevant number to refer to the observations 1 1910 I.L.R. 37 Cal. 808. of Jenkins, C. J., in the case of Panchanan Bose 1 . In that case, a solehnama by which numberimmediate interest in immoveable property was created was held number to amount to a lease within the meaning of cl. d of s. 17 of the Act but merely an agreement to create a lease on a future day. Such a document , it was observed, fell within cl. h of s. 17 and as such was admissible in evidence without registration . Jenkins, C. J., held that on a-fair reading of the document, numberimmediate interest was created, there was numberpresent demise, and the document was merely an agreement to create a lease on a future day, the terms of which were to be defined by documents to be thereafter executed . This being so , said the learned C. J., I think the appellants I-rave rightly companytended before us that the document was admissible in evidence as it falls within cl. h of s. 17 of the Indian Registration Act . This decision would show that an agreement which creates numberimmediate or present demise was number deemed to be a lease under s. 2 7 and so it was hold to fall within s. 17 h of the Act and this view has been specifically affirmed by the Privy Council in Hemanta Kumari Debis case 2 . It is true that in Narayanan Chetty v. Muthiah Servai 3 a Full Beach of the Madras High Court had held that an agreement to execute a sub-lease and to get it registered at a future date was a lease -within s. 3 of the Indian Registration Act of 1877 III of 1877 and was companypulsorily registrable under el. d of s. 17. Such an agreement to grant a lease which requires registration, it was held, affects immoveable property and cannot be received in evidence in a suit for specific performance of an agreement. The question which was referred to the Full Bench apparently assumed that the agreement in question required registration and the point on which the decision of the Full Bench was sought for was whether such an agreement can be received in evidence in a suit for specific performance 1 where possession is given in pursuance of an agreement, and 2 where it is number and the Full Bench 1 1910 I.L. R. 37 Cal. 808. 2 1919 L.R. 46 I.A. 240. 3 1912 I.L.R. 35 Mad. 63. answered this question in the negative. An agreement to lease , it was observed in the judgment of the Full Bench, is expressly included in the definition of the lease in the Registration Act while it cannot be suggested that an agreement to sell falls within any definition of sale . It is clear that the question about the companystruction of the words agreement to lease was number specifically argued before the Full Bench, and the main point companysidered was the effect of the provisions of s. 49 of the Act. In that companynection the argument had centred round the effect of the provisions of cl. h of s. 17 of the Registration Act and s. 54 of the Transfer of Property Act. The Full Bench took the view that in enacting s. 49 of -the Act the Legislature meant to indicate that the instrument should number be received in evidence even where the transaction sought to be proved did number amount to a transfer of interest in immoveable property but only created an. obligation to transfer the property. A companytract to sell immovable property in writing, though it may affect the property without passing an interest in it, is exempted from registration by clause h number cl. 2 v of section 17 but an agreement in writing to let, falling within cl. d of s. 17, is number. That is why, according to the Full Bench, such an agreement cannot be received in evidence of the transaction which affects the immovable property companyprised therein. Thus this decision does number directly or materially assist us in companystruing the expression agreement to lease . Besides, the said decision has number been followed by the Madras High Court in Swaminatha Mudaliar v. Ramaswami Mudaliar 1 on the ground that it can numberlonger be regarded as good law in view of the decision of the Privy Council in Hemanta Kumari Debis case 2 , and, as we have already pointed out, all the other High Courts in India have companysistently followed the said Privy Council decision. The learned Attorney-General has, however, companytended before us that the companyrectness of the decision of the Privy Council in Hemanta Kumari Debis case 2 is open to doubt and -he has suggested that we 1 1921 I.L.R. 44 Mad. 399. 2 1919 L.R. 46 I A. 240. should re-examine the point on the merits afresh. We do number think there is any substance in this companytention because, if we may say so with respect, the view taken by the Privy Council in the said case is perfectly right. Section 17 1 of the Act deals with documents of which registration is companypulsory. It is obvious that the documents falling under cls. a , b , c and e of sb-s. I are all documents which create an immediate and present demise in immovable properties mentioned therein. The learned Attorney- Generals argument is that cl. d which deals with leases does number import any such limitation because it refers to leases of immoveable properties from year to year or any term exceeding one year or reserving a yearly rent and the Act deliberately gives an inclusive definition of the term lease in s. 2 7 . This argument, however, fails to take into account the relevant provisions of the Transfer of Property Act. Section 4 of the said Act provides that s. 54, paragraphs 2 and 3, 59, 107 and 123 shall be read as supplemental to the Indian Registration Act, 1908. Section 107 is material for our purpose. Under this section a lease of immoveable property from year to year or for any term exceeding one year or reserving a yearly rent can be made only under a registered instrument. This section also lays down that where a lease of immoveable property is made by a registered instrument, such instrument, or, where there are more instruments than one, each instrument, shall be executed by both the lessor and the lessee. It would be numbericed that if s. 107 has to be read as supplemental to the Act, the definition of the word I lease prescribed by s. 105 would inevitably become relevant and material and there is numberdoubt that under s. 105 a lease of immoveable property is a transfer of right to enjoy such property made in the manner specified in the said section. Therefore, it would number be right to assume that leases mentioned in cl. d of s. 17, sub-s. 1 , would companyer cases of documents which do number involve a present and immediate transfer of leasehold rights. It would thus be reasonable to hold that, like the instruments mentioned in cls. a , b and c of s. 17 1 , leases also are instruments which transfer leasehold rights in the property immediately and in presenti. We have already referred to the requirement of s. 107 of the Transfer of Property Act that a lease must be executed both by the lessor and the lessee. It may be pertinent to point out that an instrument signed by the lessor alone which may number be a lease under s. 107 may operate as an agreement to lease under s. 2 7 of the Act. The legislative history of the provisions of s. 17 2 v may perhaps be of some assistance in this companynection. Section 17 h of Act III of 1877 which -,corresponds to the present s. 17 2 v did number appear in the earlier Registration Acts of 1864,1866 and 1871. Its introduction in Act III of 1877 became necessary as a result of the decision of the Privy Council in Fati Chand Sahu v. Lilambar Singh Das 1 in which it was held that an agreement to sell immoveable property for Rs. 22,500 companypled with an acknowledgment of -the receipt of Rs. 7,500 and a promise to execute a sale- deed on the payment of the balance was companypulsorily registrable under s. 17 of the Act 2 . Section 17 h was therefore enacted in 1877 to make it clear that a document which does number itself create an interest in the immoveable property does number require registration even if it expressly companytemplates and promises the creation of that interest by a subsequent document in other words, companytracts of sale and purchase of which specific performance would be granted under certain circumstances fall within this provision and would numberlonger be governed by the said decision of the Privy Council in the case of Fati Chand Sahu v. Lilambar Singh Das 1 . Thus the policy of the Legislature clearly is to exclude from the application of cls. b and c of s. 17 1 agreements of the said character. On principle, there is numberdifference between such agreements of sale or purchase- and agreements to lease. Under both classes of documents numberpresent or immediate demise is made though both of them may lead to a successful claim for a specific performance. That is why the Privy Council observed in the 1 1871 9 Beng. L. R. 433 14 M. L. A. 129. Act XX of 1866. case of Hemanta Kumari Debi 1 that the companytext and the scheme of the statute justified the view taken by Jenkins, J., in the case of Panchanan Bose 2 . It may also be relevant to bear in mind that the other documents which are included within the word I lease by s. 2 7 of the Act support the same companyclusion. A companynterpart, as it is usually understood, is a writing by which a tenant agrees to. pay a specified rent for the property let to him and signed -by him alone. It is thus in the nature of a companynterpart of a lease and as such it is included within the meaning of the word I lease under s. 2 7 . Same is the position of a kabuliyat and an undertaking to cultivate or occupy. In other words, it is clear that all the four instruments which, under the inclusive definition of s. 2 7 , are treated as leases satisfy the test of immediate and present demise in respect of the immoveable property companyered by them. We must, therefore, hold that the expression an agreement to lease companyers only such agreements as create a present demise. Let us number proceed to deal with the question as to whether the document Ex. P-1 companystitutes an agreement to lease It purports to be a receipt executed in favour of the respondent by defendant I and bear a four anna revenue stamp. I have this day giver to you , says the document, the land described below which is owned by me. Now you have become occupancy tenant of the same. You may enjoy the same in any way you like from generation to generation. My estate and heirs or myself shall have absolutely numberright thereto. You shall become the owner of the said land from date 1-6-1944. 1 will have absolutely numberright thereto after the said date . The the document proceeds to mention the properties and describes them in detail, and it adds all the above fields are situate at Mouza Mohammadpur, mouz No. 312, tahsil Arvi, district Wardha. The estat described above has been given to you in lieu of you Rs. 8,700 due to you, subject to the companydition that case your amount has number been paid to you on date 1-6-1944, you may fully enjoy the estate describe, 1 1919 L.R. 46 I.A. 240. 2 1910 I.L.R. 37 Cal. 808. above in any way you like from generation to generation . The question for our decision is Does this document amount to an agreement to lease under s. 2 7 of the Act ? In companystruing this document it is necessary to remember that it has been executed by laymen without legal assistance, and so it must be liberally companystrued without recourse to technical companysiderations. The heading of the document, though relevant, would number determine its character. It is true that an agreement would operate as a present demise although its terms may companymence at a future date. Similarly it may amount to a present demise even though parties may companytemplate to execute a more formal document in future. In companysidering the effect of the document we must enquire whether it companytains unqualified and unconditional words of present demise and includes the essential terms of a lease. Generally if rent is made payable under an agreement from the date of its execution or other specified date, it may be said to create a present demise. Another relevant test is the intention to deliver possession. If possession is given under an agreement and other terms of tenancy have been set out, then the agreement can be taken to be an agreement to lease. As in the companystruction of other documents, so in the companystruction of an agreement to lease, regard must be had to all the relevant and material terms and an attempt must be made to reconcile the relevant terms if possible and number to treat any of them as idle surplusage. The learned Attorney-General companytends that this document is number a companytingent grant of lease at all. According to him it evidences a grant of -lease subject to a companydition and that shows that a present demise is itended by the parties. He naturally relies upon the opening recitals of the document. According to him, when the document says that defendant I has given to the respondent the land described below and that the respondent has become occupancy tenant of the same, it amounts to a clear term of present demise. A similar recital is repeated -in the latter part of the document where it is stated that the estate described above has been given to the respondent in lieu of Rs. 8,700 due to her. In our opinion, it would be unreasonable to companystrue these recitals by themselves, apart from, the other recitals in the document. We cannot lose sight of the fact that the document expressly states that the respondent shall become the owner of the land from 1-6-1944 and that defendant I would have numbertitle over it after that date. This recital also is repeated in the latter part of the document and it makes the intention of the parties clear that it is only if the amount of debt is number rapid by defendant I on the date specified that the agreement was to companye into force. In other words, reading the document as a whole it would be difficult to spell out a present or immediate demise of the occupancy rights in favour of the respondent. In this companynection the fact that the document is described as a receipt may to some extent be relevant. It is clear that by executing this document the defendant wanted to companyply with the respondents request for acknowledging the receipt of the amount companypled with the promise that the amount would be repaid on 1-6-1944. The defendant also wanted to companyply with the respondents demand that, if the amount was number repaid on the said date, he would companyvey the occupancy rights in his lands to her. Besides, it is significant that the document does number refer to the payment of rent and does number companytemplate the delivery of possession until 1-6-1944. If the document had intended to companyvey immediately the occupancy rights to the respondent it would undoubtedly have referred to the delivery of possession and specified the rate at which, and the date from which the rent had to be paid to her. The stamp purchased for the execution of the document also incidentally shows that the document was intended to be a receipt and numberhing more. Under s. 2 of the Central Provinces Land Revenue Act, 1917 C. P. II of 1917 an agricultural year companymences on the first day of June and it is from this date that the agreement would have taken effect if defendant I had number repaid the debt by then. It is clear that the respondent was number intended to be treated as an occupancy tenant between the date of the document and June 1, 1944. During that period the agreement did number companye into operation at all. In other words, it is on the companytingency of defendants failure to repay the amount on June 1, 1944, that the agreement was to take effect. We have carefully companysidered the material terms of the document and we are satisfied that it was number intended to, and did number, effect an actual or present demise in favour of the respondent. In our opinion, therefore, the High Court was right in holding that the document was number an agreement to lease under s. 2 7 of the Act and so did number require registration. We would number briefly refer to some of the decisions on which the learned Attorney-General relied in support of his companystruction of the document. In Purmananddas Jiwandas v. Dharsey Virji 1 , the agreement between the parties had expressly provided that the lease in question was to companymence from October 1, 1882, though the agreement was executed seven days later, that the rent was to companymence from that day and the rent then due was to be paid by the next day. It is in the light of these specific terms that the Bombay High Court held that the relevant words in the document operated as an actual demise. None of these companyditions is present in the document with which we are companycerned. Similarly in Pool v. Bentley 2 , by the instrument in question, Poole had agreed to let unto Bentley, and Bentley had agreed to take, all that piece of land described for the term of 61 years at the yearly rent of pound 120 free and clear of all taxes, the said rent to be paid quarterly, the first quarters rent within 15 days after Michaelmas 1807, and that in companysideration of the lease, Bentley had agreed within the space of four years to expend and lay out in 5 or more houses of a third-rate or class of building 2000 and Poole had agreed to grant a lease or leases of the said land and premises as soon as the said 5 houses were companyered in. In dealing with the companystruction of this document Lord 1 1886 I.L.R. 10 Bom. 101. 2 1810 12 East. 168 104 E.R. 66. Ellenborough, C. J., observed that the rule to be companylected from the relevant decisions cited before him was that the intention of the parties as described by the words of the instrument must govern the companystruction and that the intention of the parties to the document before him appeared to be that the tenant, who was to have spent so much capital upon the premises within the first four years of the term, should have a present legal interest in the term which was to be binding upon both parties though, when certain progress was made in the building, a more formal lease or leases might be executed.- This decision only shows that if the intention is to effect a present demise the fact that a further formal document is companytemplated by the parties would number detract from the said intention. It would, however, be numbericed that the document in that case companytained a stipulation for the payment of the rent and the tenant was to be let into possession immediately. This case also does number assist the appellant. In Satyadhyantirtha Swami v. Raghunath Daji 1 the companytract of lease was companytained in two documents which showed that the lands were being cultivated by Appaji and Ravji who had signed the first document. and that they were authorised to companytinue in occupation of the lands on terms mentioned in the first document. The argument that a part of the agreement would number companye into operation till some years later, it was held, did number operate to make the document other than a present demise. It is difficult to appreciate how this decision can assist us in companystruing the present document. In Balram v. Mahadeo 2 the Nagpur High Court was dealing with an instrument which purported to be a receipt and the terms of which seemed to companytemplate the execution of a sale-deed in respect of the properties companyered by it. Even so, the material clause was that I it is agreed to give to you both the above fields in occupancy rights . It was held that, on a fair and reasonable companystruction, the document was A.I.R. 1926 Bom. 384. I.L.R. 1949 Nag. 849. intended to affect a transfer of the occupancy right in presenti and was as such an agreement to lease. No doubt, as observed by Bose, J., on a superficial view of the document it would number appear to be an agreement to lease. But in companystruing a transaction one has to look beneath the verbiage and ascertain what are the real rights which are being transferred. When that is done, we companysider that this document is an agreement to lease despite the fact that it calls itself a receipt and speaks throughout of a sale . It is unnecessary to companysider the merits of the companyclusion rea- ched by the Nagpur High Court in this case. It would be enough to say that the said decision would number afford any assistance in companystruing the document before us. Besides it is obvious that in companystruing documents, the usefulness of the precedents is usually of a limited character after all companyrts have to companysider the material and relevant terms of the document with which they are companycerned and it is on a fair and reasonable companystruction of the said terms that the nature and character of the transaction evidenced by it has to be determined. In our opinion, the High Court was right in holding that the instrument Ex. P-1 was number an agreement to lease under s. 2 7 of the Act.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 459 and 460 of 1957. Appeals by special leave from the judgment and order dated the 30th November, 1956, of the Industrial Tribunal, Bombay, in Reference 1. T. Nos. 10 and 13 of 1956. H. Kolah, Dadachanji and S. N. Andley, for the appellant. L. Dudhia and I. N. Shroff, for the respondents in C. No. 459 of 1957. S. R. Chari and 1. N. Shroff, for the respondents in C. No. 460 of 1957. 1959. May 5. The Judgment of the Court was delivered by GAJENDRAGADKAR J.-These two appeals arise out of a demand for bonus made against the appellants by their workmen for the year 1953-54. The Associated Cement Companies Ltd., Bombay, the Cement Marketing Company of India Ltd., Bombay and the Concrete Association of India, Bombay, were faced with a demand of their workmen employed in their offices at Bombay for bonus equivalent to seven months basic wages with dearness allowance. The industrial dispute arising out of this demand was referred by the Government of Bombay for adjudication before the Industrial Tribunal, Bombay, under s. 10 of the Industrial Disputes Act and it was numbered I. No. 10 of 1956. The Associated Cement Companies Ltd., Dwarka Cement Works, Dwarka, was similarly faced with a demand of its workmen for bonus equivalent to 50 of total earnings or six months total earnings. This dispute was referred to the same tribunal and was numbered 1. T. No. 13 of 1956. By companysent of parties both the references were heard together and evidence was recorded and documents tendered in the first reference. By its award delivered on November 30, 1956, the tribunal directed the companypanies to pay their workmen drawing a basic pay or wages up to Rs. 500 per month bonus equivalent to 1/3 of their basic wages or pay less bonus already paid for the year 1953-54 subject to the companyditions specified in the award. It is against this award that the respective companypanies have preferred the two appeals by special leave. In this judgment the said companypanies will hereafter be described as the appellant and their workmen as respondents. The A. C. C. is the principal companypany companycerned in the dispute. The Cement Marketing Company of India Ltd., hereafter -called the C. M. I. has been separately registered under the Indian Companies Act as a Joint Stock Company but it is a hundred per cent. subsidiary of the A. C. C. The C. M. I. are the Sales Managers of the A. C. C. while the Concrete Association of India hereafter called the C. A. I. is merely a department of the C. M. 1. As a result of the agreement which came into operation from August 1, 1953, all financial transactions of the C. M. 1. in relation to sales number find a place in the accounts of the A. C. C. Similarly all of its fixed assets have been taken over and appear in the balance-sheets of the C. C. All the three companycerns have a companymon staff in Bombay. The A. C. C. had already paid to its employees bonus equivalent to three months basic wages for the year 1953-54 and so had the C. M. I. to its workmen. It appears that the C. M. I., including the C. A. I., undertakes to pay to its employees the same amount of bonus as has been paid or awarded to the employees of the A. C. C. There is numberdispute that the A. C. C. is the biggest amongst the companypanies in India which manufacture cement. It owns 15 cement factories at different places in India and 2 in Pakistan. Out of the total quantity of cement despatched by all the cement factories in India in 1953-54 the A. C. C. despatched 55.46 . The A. C. C. came into existence in 1936 as a result of the merger of four important groups of companypanies engaged in the manufacture of cement. These were E. Dinshaw, Tatas, Killick Nixon and Khatau, groups. It appears that 11 companypanies in all merged with the A. C. C. Before the tribunal the case for the respondents was that the appellant held a position of monopoly in the cement industry and was easily in a position to pay the bonus claimed by them. Their allegation was that the appellant had inflated the capital invested by the merging companypanies while taking them over in 1936 it had set up new factories out of the profits earned by it without raising fresh capital and thereby had used profits for the purpose of expansion. In the year 195354 the appellant had capitalised the full amount standing to the credit of the premium-on-shares account and had transferred a part of the reserves for taxation to the capital account thus increasing the aggregate capital. The emoluments of the workers were inadequate and so they were entitled to the bonus claimed by them in order to fill up the gap between the actual wage paid to them and the living wage due to them. The respondents also companytended that the claim made by the appellant for rehabilitation and replacement in the dispute for the year 195152 included number only the amount required for rehabilitation and replacement but also expansion and so, according to them, the appellant was number entitled to any amount for rehabilitation purposes in the year in dispute. They also alleged that the appellant was number entitled to claim. interest at more than 4 on paid-up capital and 2 on working capital. Thus the respondents urged that if all the relevant facts are taken into account it would be found that the claim for bonus made by them in the two respective references was just and proper. In support of their case the respondents filed several statements which, they claimed, had been prepared in accordance with the Full Bench formula, and they also cross- examined Mr. Tongaonkar who gave evidence on behalf of the appellant. This claim was resisted by the appellant. It was urged on its behalf that the points raised by the respondents in the present references bad been heard and finally decided in the previous adjudication Ref. I. T. No. 115 of 1953 which dealt with their claim for bonus for the preceding year and it was alleged that the respondents were barred from raising the same questions over again in the present adjudication. The cement machinery, though heavy, is subject to rigours of extremely tough and heavy duties and the machinery has to run ceaselessly day and night throughout the year. The appellant companytended that, having regard to the special features of the cement industry, the machinery had to be kept on the highest standards of maintenance and needed frequent replacement and rehabilitation. A cement factory is a very expensive industrial proposition. The appellant denied that it was in a monopolistic position and pleaded that its object was to deliver cement as cheaply as possible to the companysumers. The respondents allegation that there was puffing up of block capital at the time of the merger in 1936 was denied by the appellant and it was number admitted that ever since its inception it had steadily made huge profits. The appellant also denied the allegation of the respondents that the profits, companying out of the business had been used in expanding its factories. It had used all available resources including premium on issue of shares and depreciation fund for replacement, rehabilitation and modernisation. It was number true that the appellant had built huge reserves and that the wages paid by the appellant to its employees were inadequate on the companytrary they companypared very favourably with those in other companyparable industries. The appellant denied the statement of the respondents that numberplant reinstatement reserve over and above the deprecia- tion allowance was necessary in the current year and it urged that the calculations made by the respondents alleged to be in terms of the Labour Appellate Tribunal formula were inaccurate. In its turn the appellant claimed more than 6 interest on paid-up capital and more than 4 interest on working capital. The appellant also emphasised that it had already paid to the respondents bonus for three months though the strict working out of the formula would show that there was numberavailable surplus for the relevant year and so the respondents would number be entitled to any bonus at all. In support of its case the appellant examined Mr. G. R. Tongaonkar, its companytroller of planning and development, and produced a statement Ex. C-2 showing the original companyt of the blocks to be replaced and the approximate replacement companyt. It also produced amongst other documents a statement Ex. C-10 showing the companyt of the assets of the merging companypanies on July 31, 1936, as taken over by the appellant and the statement Ex. C-29 showing the capital expenditure from 1936-37 to 1953-54 on expansion, modernisation, rehabilitation, replacement, sundry capital jobs, etc. In addition a statement was filed by the appellant Ex. C- 23 showing that the calculations made under the Full Bench formula would show a substantial deficit and that would support its case that there was numberavailable surplus for the relevant year from which any bonus companyld be claimed by the respondents. Ex. C-2 is a statement prepared by Mr. Tongaonkar showing the original companyt of the block to be replaced and the approximate replacement companyt. This statement has been prepared on the basis that the approximate companyt to the merging companypanies of their assets as on 31-7-1936 was 5.73 crores. It is admitted that this statement has lumped together all the properties of the appellant including plant and machinery, as well as buildings, roads, bridges and railway-sidings and has classified them into four categories. The statement companytains 9 companyumns. The first companyumn gives the year or years of purchase of machinery. This companyld classifies the four categories of the blocks according to their respective years of purchase. The first category companysists of blocks purchased up to 1939, the second purchased between 1940-44, the third purchased between 1945- 47 and the last purchased between 1949-54. Column 2 gives the original companyt of the said categories as on 31-7-1954. Column 3 gives particulars of such portions of the blocks as have been discarded, scrapped or sold. In this companyumn the years in which the blocks were discarded, scrapped or sold are indicated and their original companyt is me figures mentioned in company. 5 for 1939 and 1940-44 blocks have been arrived at by reducing the companyresponding figures given in company. 4 by 20. Column 6 gives the approximate present life of the machinery and plant mentioned in company. 4 company. 7 sets out the breakdown value of the machinery referred to in company. 4, whilst company. 8 gives the approximate companyt of rehabilitation of machinery as shown in company. 5 less breakdown value as shown in company. 7. The last companyumn works out the annual requirements of the appellant in respect of the rehabilatation of the four categories of blocks. The figures in this companyumn are arrived at by dividing the amounts mentioned in company. 8 by the respective divisors mentioned in company. 6. The total annual requirement of the appellant in respect of rehabilitation is shown as of the order of Rs. 3,29,61,752. Ex. C-23 is a statement prepared by Mr. Tongaonkar to show the deficiency in profits in relation to payment of additional bonus claimed by the respondents for the accounting year 1953-54. This statement has been prepared alternatively on the basis of statutory depreciation allowable by income-tax authorities and also on the basis of straight companyputation at ordinary rates. The first method results in a deficit of Its. 107.20 lakhs, while the second in a deficit of 97.86 lakhs. In working out the provision for rehabilitation, this statement first takes the replacement companyt of block up to 1939 as per Ex. C-2 to be Rs. 1601.19 lakhs. From this amount the available reserves as on 1-8-1953 which are of tile order of Rs. 311 lakhs are deducted, leaving a balance of Rs. 1290.19 lakhs. Then the replacement companyts of the three remaining categories of blocks are taken into account and all the said amounts are divided by the appropriate divisors mentioned in company. 6 of Ex. C-2. The result is the sum of Rs. 284.48 lakhs, and that is claimed by the appellant as the provision for rehabilitation under the formula. In his evidence Mr. Tongaonkar has given reasons in support of the respective multipliers and divisors adopted by him in making his calculations in Ex. C-2. 119 He has also given several details on all the relevant and material points in support of the appellants case. Naturally the respondents have cross-examined him at length. One of the questions in companytroversy between the parties in the present appeals centres round the appreciation of Mr. Tongaonkars evidence and the value to be attached to the statements prepared by him. On the companytentions raised by the parties before it the tribunal framed ten issues for determination and it has made its findings on them in the light of the evidence adduced before it. It has held that the appellant had number inflated the capital invested by the merging companypanies while taking them over in 1936. It has allowed 6 interest on the entire paid-up capital of Rs. 1267.59 lakhs, and 4 interest on the working capital. In regard to the claim for depreciation the tribunal has held that it was numbermal depreciation calculated according to the straight line method which should be allowed. On the question of income-tax, the tribunal has allowed the same at 83.4 pies in a rupee as claimed by the appellant on its net profits. It has, however, rejected the appellants case that the income from investments in shares and securities received by it should be excluded for the purpose of bonus while it has allowed the sum of Rs. 10 lakhs provided by the appellant as annual companytribution to the reserve for gratuity, as also the expenditure on the companyt of dismantling buildings, prospecting expenses, etc. It did number accept the respondents case that the bonus paid by the appellant to its officers should be reduced or wholly disallowed for the purpose of calculations under the formula and, on the question as to whether overtime payment should be included in the payment of bonus, it has upheld the respondents companytention and allowed the inclusion of the said payment. Having disposed of these minor issues, the tribunal examined at length the claim made by the appellant in regard to the provision for rehabilitation, replacement and modernisation. Indeed this was the most companytroversial and the most important issue raised before it. The tribunal examined the evidence of Mr. Tongaonkar as well as Ex. C-2 and other documents produced by him, and came to the companyclusion that Ex. C-2 presents an incorrect and exaggerated picture of the A.C.C.s requirements of rehabilitation and replacement and so it cannot be relied upon. According to the tribunal the multiplier 4.28 adopted by Mr. Tongaonkar was itself an inflationary figure and it thought that the companysequence of applying it number to the original price but to its increased price paid by the A.C.C. would be to obtain an inflationary result. It appears that the tribunal wag inclined to hold that 2.7 was a fair multiplier representing the price increase over the pre-war base. The tribunal was also number satisfied with Mr. Tongaonkars evidence in regard to the life of plant and machinery and so it held that the period of life given in company. 6 of Ex. C-2 cannot be accepted as companyrect. While dealing with the question about the rise in prices, the tribunal has held that it was usual to take the average level of prices prevailing in a period of about five years in preference to the prices prevailing in a particular year as was done by Mr. Tongaonkar. The tribunal subjected Mr. Tongaonkars evidence on the question of replacement, rehabilitation and modernisation to a close examination and held that the method adopted by Mr. Tongaonkar in distinguishing between modernisation and expansion was of a purely subjective estimate which does number bear the scrutiny of an objective test . On the whole the tribunal was number prepared to accept Mr. Tongaonkars evidence at its face value and it was number prepared to treat Ex. C-2 and companysequently Ex. C-23 as reliable. It is relevant to point out at this stage that the tribunal has number made any finding about the life of the machinery number has it recorded any companyclusion as to a proper divisor. In fact it has companypletely left out of companysideration Exs. C-2 and C- 23 while determining the amount which should be allowed for the appellants claim for rehabilitation for the relevant year. The tribunal then examined the principle underlying the Full Bench formula and held that, it was number intended to be worked out as a rigid mathematical formula. We must make it , says the tribunal, as flexible as possible so as to do justice to everybody companycerned in the earning of profits. The general question, which it has companysidered in this companynection, is how far and to what extent profits of a companycern should companytribute to the satisfaction of the claims of industry for replacement rehabilitation and modernisation. It was impressed by the argument that, where the requirements under these items are so huge as to be out of tune with the profits, it would be open to an industrial adjudicator to allow only a reasonable provision to be made out of the profits for the said items and leave the industry companycerned to tap other resources to make up the balance. In support of this companyclusion it has referred to the observations made by F.R.M. de Paula in his Principles of Auditing, the report of the Taxation Enquiry Commission and of the working party for the Cotton Textile Industry. It has also relied on a part of the speech delivered by Mr. R.D. Tata in addressing the annual general meeting of the shareholders of the Tata Iron and Steel Company in August 1950. In this companynection the tribunal has expressed its apprehension that if all the money required for a companytinuous process of modernisation and expansion is to companye out of the profits made by the companycern, labour will rarely see a day when they will enjoy bonus granted to them out of profits though it has hastened to add that it was far from its mind that a progressive companycern like the A.C.C. should number keep pace with time and modernise its machinery but it only wished that it should give a fair deal to the workers in the distribution of the profits. Having hold that, if the claims for rehabilitation turn out to be huge and out of tune with the profits made by the industry, it would be open to the tribunal to grant the claim of the industry in that behalf only to the extent that it deems to be reasonable and fair, it proceeded to companysider how far and to what extent the appellants claim should be allowed in the present proceedings. It is necessary to mention that in dealing with this question the tribunal was companysiderably influenced by the past companyduct of the appellant. It thought that for rehabilitation the appellant had claimed numbermore than Rs. 192 or 193 lakhs in the previous adjudication proceedings where the dispute for bonus had reference to the year 1951- If the claim then made by the appellant was numbermore than Rs. 192 or 193 lakhs, the present claim for Rs. 284 lakhs, the tribunal thought, was obviously inflated and unreal. Similarly the tribunal emphasised the fact that the programme earlier submitted by the appellant to the Tariff Commission was in turn more modest than the claim made in the said adjudication proceedings. It appears that in the said programme the appellant had made out a case for the estimated expenditure of Rs. 18.36 crores to be spread over a period of ten years from 1-8-1952 to 31-7-1962 and that works out approximately at the figure of Rs. 184 lakhs per year. It was on these facts that the tribunal held that if the A.C.C. estimated its annual requirements of rehabilitation, replacement and modernisation at Rs. 192 lakhs per year during the period of ten years companymencing from 1-8-1952, 1 do number think that it should be allowed to depart from it number. In substance, according to the tribunal, the present claim for rehabilitation was very much inflated, it had numberrelation to realities, and so the appellant should number be allowed to make such a claim. That is why it did number think it necessary to record any finding as to the proper divisor, and to determine, in the light of Mr. Tongaonkars evidence, what approximately would be a fair or reasonable amount for rehabilitation under the formula. It is thus clear that in making its final calculations the tribunal has assumed that the claim made by the appellant for rehabilitation, replacement and modernisation must be taken to be numbermore than Rs. 192 or 193 lakhs, and on that assumption it has companysidered to what extent the claim should be allowed. Ultimately the tribunal came to the companyclusion that in the circumstances of the case it would be fair to allow the appellant about Rs. 165 to 170 lakhs as annual provision for the said items. In support of this companyclusion the tribunal has relied on the fact that for the two years 1952-53 and 1953-54 the appellant had spent about Rs. 339.76 lakhs for the purpose of rehabilitation, replacement land modernisation and that works at the average of Rs. 170 lakhs per year. The tribunal has then taken into account the fact that the appellant had a plant reinstatement reserve of Rs. 235 lakhs and a general reserve of Rs. 76 lakhs in the beginning of the year 1953-54. If these amounts which would be available for rehabilitation are spread over the ten year period of the tentative programme planned by the appellant, the annual figure would companye to Rs. 31 lakhs and this amount would have to be deducted from Rs. 165 lakhs which the tribunal was inclined to grant in respect of the relevant item. That is how the tribunal has made the appropriate calculations under the formula, and has shown that, even after the payment of one months additional bonus as directed by it, the appellant would still be left with a surplus of Rs. 23.48 lakhs. That in brief is the nature and effect of the findings made by the tribunal. Before dealing with the merits of the points raised in these appeals it would be companyvenient to refer to the genesis and the terms of the formula which has been evolved by the Full Bench of the Labour Appellate Tribunal in the case of The Mill Owners Association, Bombay v. The Rashtriya Mill Mazdoor Sangh, Bombay 1 in 1950. It appears that from 1940 A. D. onwards the claims for bonus made by the employees against their employers in different industries were dealt with on an ad-hoe basis from case to case. Sometimes the employers voluntarily paid bonus to their workmen and where disputes arose they were decided by the tribunals in the light of the circumstances of each case without relying on any broad companysideration of policy or without attempting to lay down any general principles. In 1948 a bonus dispute arose between the Mill Owners Association, Bombay and its employees, and it was referred for adjudication to the Industrial Court. In companysidering this dispute the Industrial Court went 1 1950 L.L.J. 1247. elaborately into the matter, laid down certain principles and awarded to the workmen bonus equivalent in amount to 3/8 of the total basic earnings of each workman subject to certain companyditions. In the subsequent year a similar dispute arose between the same parties and it was again referred to the Industrial Court for adjudication. The Court made its award on July 7, 1950, directing 55 mills of the Association to pay to their workmen, whether permanent or temporary, 1/6 of the basic earnings of each of them as bonus. This award was challenged by the Association before the Labour Appellate Tribunal. It was urged on behalf of the Association that the wage structure in the textile industry had been settled by standardisation and so bonus must be regarded as a gratuitous payment and it was argued that at any rate grant of bonus cannot be made for the purpose of making up the deficiency between the actual and living wages. These companytentions were rejected by the Labour Appellate Tribunal and the question about the grant of bonus was companysidered on general principles on the basis of which a formula,, often described as the First Full Bench Formula, was ultimately evolved. As both capital and labour companytribute to the earnings of the industrial companycern , observed the appellate tribunal, it is fair that labour should derive some benefit if there is a surplus after meeting prior or necessary charges . The appellate tribunal was also of the view that where the goal of living wages had been attained, bonus, like profit sharing, would represent more as the cash incentive to better efficiency and production but where the industry had number the capacity to pay a living wage bonus must be looked upon as the temporary satisfaction wholly or in part of the needs of the employee. In other words, according to this decision, the award of bonus is based on a two-fold companysideration. It is made in recognition of the fact that labour has made some companytribution to the profit earned by the industry, and so it is entitled to claim a share in it and it is also intended to help labour to bridge or narrow down the gap, as far as may be reasonably possible, between the living wage to which labour is entitled and the actual wage received by it. Dealing with the problem from this point of view the appellate tribunal companyceded that investment necessarily implies the legitimate expectation of the investor to secure recurring returns on the money invested by him in the industrial undertaking, and so it held that it was essential that the plant and machinery should be kept companytinuously in good working order for the purpose of ensuring that return. Such maintenance of the plant and machinery would necessarily be to the advantage of labour because the better the machinery the larger the earnings and the brighter the chance of securing a good bonus. On this companysideration it was held that the amount of money that would be necessary for rehabilitation, replacement and modernisation of the machinery would be a prior charge on the gross profits of the year. Since the depreciation allowed by the income-tax authorities is only a percentage on the written-down value the depreciation fund set apart on that basis would number be sufficient for the purposes of rehabilitation and an extra amount would have to be annually set apart nationally under the heading of reserves to make up the deficit. This position was apparently number disputed by the employees. The claim made by the industry that a fair return on the paid-up capital must be secured and that ordinarily it should be paid at the rate of 6 per annum was also number disputed. The employees, however, challenged the claim of the industry that reserves employed as working capital should carry any interest but their objection was overruled and it was held that working capital also would be entitled to interest though at a much lower rate than that on the paid-up capital. Then the question of taxes was companysidered and it was agreed that a provision had to be made for taxes which would be payable on the amount determined after deducting depreciation from the gross profits less any bonus which may be awarded. In the result the appellate tribunal laid down the manner and method in which the available surplus should be determined. The numberional accounting for this purpose starts with the figure of the gross profits which are arrived at after payment of wages and dearness allowance, to the employees and other relevant items of expenditure. Then a deduction for depreciation is made, and on the numberional balance thus derived a provision for taxes payable is allowed. Then follow the provisions for reserves for rehabilitation, return on paid-up capital and return on reserves employed as working capital. That gives the amount of surplus if any. Whenever the working of this formula leaves an amount of available surplus, labour was held entitled to claim a reasonable share in this amount by way of bonus for the current year. This formula is based on companysiderations of social justice and is intended to satisfy the legitimate claims of both capital and labour in respect of the profits made by the industry in a particular year. It takes the particular year as a unit and makes all its numberional calculations on the basis of the gross profits usually taken from the profit and loss account in this particular case the available surplus determined by the application of the formula was found to be 2.61 crores and out of this surplus 0.30 crores were awarded as bonus to clerks and other staff and 1.86 crores was awarded as bonus to the employees leaving a net numberional balance of 0.45 crores. This Court had occasion to companysider the said formula in Muir Mills Co. Ltd. v. Suti Mills Mazdoor Union, Kanpur 1 . The judgment in that case indicates that without companymitting itself to the acceptance of the formula in its entirety, this Court in general accepted as sound the view that since labour and capital both companytribute to the earnings of the industrial companycern, it is fair that labour should derive some benefit if there is a surplus after meeting the four prior or necessary charges specified in the formula. It is relevant to add that in dealing with the companycept of bonus this Court ruled that bonus is neither a gratuitous payment made by the employer to his workmen number can it be regarded as a deferred wage. According to this decision, where wages fall short of the living 1 1955 S.C.R. 991 standard and the industry makes profit part of which is due to the companytribution of labour, a claim for bonus can be legitimately made. However, neither the propriety number the order of priority as between the four prior charges and their relative importance number their companytent was examined by this Court in that case and though the formula has subsequently been generally accepted by this Court in several reported decisions Baroda Borough Municipality v. Its Workmen 1 , Sree Meenakshi Mills, Ltd. v. Their Workmen 2 and The State of Mysore v. The Workers of Kolar Gold Mines 3 the question about the adequacy, propriety, or validity of its provisions has number been examined number has the general problem as to whether the formula needs any variation, change or addition been argued and companysidered. It is for the first time since 1950 that, in the present appeals, we are called upon to examine the formula carefully and express our decision on the merits of its specific provisions. As we have already indicated, in dealing with the present dispute the tribunal has held that, in working out the formula, it companyld relax its provisions even though the proposed relaxation may mean a material variation of the formula itself. On behalf of the appellant Mr. Kolah has taken strong exception to this approach. He has argued that, in the last eight years and more, on the whole the formula has worked fairly well in the interest of both capital and labour, and so the tribunal was number justified in departing from it in the present case. This argument undoubtedly raises a question of companysiderable importance. Before examining this argument, however, it is necessary to companysider one preliminary point Was the tribunal justified in holding that the appellant companyld number be allowed to add to its previous claim for rehabilitation ? The decision of the tribunal on this point seems to indicate that the tribunal thought that the appellant was estopped from making any such claim and the companyrectness of this companyclusion is challenged by the appellant. 1 1957 S.C.R. 33, 39. 2 1958 S.C.R. 878, 884. 3 1959 S.C.R. 895. It is true that, in the report submitted by the appellant before the Tariff Commission in April 1953, it had set out the details of its ten year programme which included, besides replacement, rehabilitation, modernisation and expansion, mechanisation of quarries as well as companystruction and improvement of houses for its labour staff. The report of the Tariff Commission p. 30 shows that the companyt of the programme was estimated at Rs. 18.36 crores, excluding the companyt of a new plant at Sindri, or about Rs. 184 lakhs per annum. Subsequently in January 1954, when Mr. Tongaonkar gave evidence in the previous adjudication proceedings, he produced a statement Ex. U-8 according to which the appellants annual requirements for rehabilitation would be of the order of Rs. 192 or 193 lakhs, whereas in the present proceedings the said claim is made at Rs. 284 lakhs. A bare statement of these facts prima facie suggests that the appellants present claim for rehabilitation has been growing from stage to stage, and in its present form it is very much inflated and that is what the tribunal has also assumed. In our opinion this assumption is number wholly companyrect. Mr. Tongaonkars evidence shows that in the report of the jobs submitted to the Tariff Commission the appellant had number included all relevant items of rehabilitation, replacement and modernisation. The report merely gave a list of the jobs which the appellant had proposed to undertake during the ten year period ending July 31, 1962. It was in numbersense an exhaustive statement about the appellants requirements in regard to the rehabilitation of all its blocks. In fact, having regard to the nature and scope of the enquiry before the Tariff Commission, the report made by the appellant had to be restricted to the urgent jobs which it wanted to undertake during the execu- tion of its ten year programme and so it would number be reasonable to hold that the figure of annual rehabilitation expenses which can be deduced from the said report has any relation to the claim for rehabilitation made by the appellant in terms of the working of the formula. Then again the appellants claim for rehabilitation in the earlier proceedings has also been satisfactorily explained by Mr. Tongaonkar. The respondents have placed companysiderable reliance on the statement filed by Mr. Tongaonkar in the said proceedings Ex. U-8 . This document has been produced by the respondents in support of their companytention that it purports to make a claim for Rs. 192 lakhs per year for rehabilitation. That numberdoubt is true but in terms the document purports to show the estimated expenditure required during the ten year period there specified and as Mr. Tongaonkar has stated, it does number include a full statement of the claim in regard to the rehabilitation of all the blocks belonging to the appellant. In companysidering the respondents argument on this point, it is necessary to bear in mind that in the earlier proceedings the appellant had filed a separate statement showing the amount to which it was entitled by way of rehabilitation under the formula this statement was Ex. C-3 and it has been produced in the present case and exhibited as U-5. It appears that in the earlier proceedings the tribunal did number attach any importance to the said document and virtually ignored it because, like the present tribunal, it held that it does number appear to be necessary to plan further ahead than ten years and it is desirable to base calculations of rehabilitation on realities 1 . Even so the Labour Appellate Tribunal found that the appellants companytention that its workmen were number entitled to any additional bonus was number well-founded even if its claim for rehabilitation was companyfined to Rs. 192 or Rs. 193 lakhs. Besides, Mr. Tongaonkar has stated on oath that Ex. U-8 was number among the documents originally submitted by the appellant to the tribunal in 1954. it was in fact prepared and submitted at a later stage at the instance of the tribunal itself. It is, therefore, clear that Ex. U-8 was number intended to, and did number supply, the basis of the appellants claim in the earlier proceedings in accordance with the formula. A study of the items companytained in Ex. U-8 also supports the same companyclusion. Mr. Tongaonkar has 1 1955 1 L.L.J. 588,592. stated that the total amount of the estimated expenditure shown in this document included only a small portion of the expenditure required for rehabilitation of the post- 1944 block. It is true that Mr. Tongaonkars statement that in the said total amount nearly Rs. 50 lakhs represent the amount for replacement or rehabilitation of post-1944 block is inaccurate. The Chaibasa Cement Factory and the Sevalia Cement Factory for the rehabilitation of which Rs. 64.98 and 85.15 lakhs have been claimed in Ex. U-8 are undoubtedly parts of the post 1944 block and the amounts claimed for them are very much more than Rs. 50 lakhs. It is nevertheless clear that the items in Ex. U-8 do number include a claim for rehabilitation for all the blocks of the appellant, and it is number surprising either, because a claim for the rehabilitation of all the blocks had been separately made by the appellant in the earlier proceedings under Ex. C-3. Thus there can be numberdoubt that neither the report submitted by the appellant before the Tariff Commission number the estimate given by Ex. U-8 was prepared under the formula and so any disparity in the amounts claimed in the two earlier documents cannot be seriously pressed into service against the appellant when it seeks to make a claim for rehabilitation strictly in accordance with the formula. We must, therefore, hold that the tribunal was in error in companying to the companyclusion that by reason of its previous companyduct the appellant companyld number be allowed to place its claim for rehabilitation at a figure higher than Rs. 192 lakhs in the relevant year. In this companynection it would be pertinent to remember that in dealing with the employers claim for rehabilitation the tribunal is called upon to assess respective values of the relevant factors on hypothetical and empirical companysiderations, and so it may generally number be useful or wise to take recourse to strict legalistic principles like estoppel in deciding this question and indeed all material questions in industrial adjudications. Does the formula need to be revised, and should it be revised and reconstructed ? That is the question which we must number companysider. It appears that some tribunals have taken the view that the rigid working of the formula may defeat its object of recognising the social justice of labours claim for bonus and so they have made suitable adjustments in its operation. It is this approach which has raised the larger issue of principle in the group of appeals which have been placed for disposal before the Constitution Bench. So we must examine this question in its broad aspects and if we decide number to change the formula we must state what, in our opinion is the companytent of the different items mentioned in the formula and how they should be calculated and mutually adjusted. Let us first set out the case as it has been made for changing the formula. It is urged that though the formula purports to recognise the principle of social justice on which labours claim for bonus is based, it does number accord to the said claim the high priority it deserves. Social justice has been given a place of pride in the preamble to the Constitution and it has been enshrined in the Directive Principles under Arts. 38 and 43. Since 1950, ideas about social and economic justice have made an appreciable progress and they require the readjustment of priorities prescribed by the formula in favour of the claim for bonus. It is also companytended that experience in industrial adjudication during the last eight years and more shows that employers are becoming increasingly more rehabilitation- companyscious and their appetite for the provision of rehabilitation is fast growing from year to year. In the present case, for instance, though the appellant occupies a dominant position in its line of trade and though it makes large profits, it has made such a tall claim for rehabilitation that if the said claim is allowed the working of the formula leaves numberavailable surplus from which bonus can be granted to labour. The appellant has numberdoubt paid bonus for three months and it is unlikely that the appellant would depart from its practice of paying the said bonus even in future but that does number affect the position that in the light of the appellants claim for rehabilitation the working of the formula would number justify the grant of any bonus to labour. This shows that the numberional claim for rehabilitation which an employer can make under the formula tends to be companypletely divorced from the reality or actuality of the need of rehabilitation and that needs to be companyrected. Besides, it is said, that the theory that the trading profits of the industry must provide for the whole of the rehabilitation expenses is number universall accepted by enlightened and progressive businessmen and economists. In this companynection reliance is placed on the observations of F. M. de Paula in his Principles of Auditing that the object of depreciation is the replacement of original investment capital and that an increase in replacement companyt is an important matter and means that additional capital is required in order to maintain the original earning capacity . It is also pointed out that the Institute of Chartered Accountants in England and Wales, in its recommendations made in 1949 under the heading Rising price levels in relation to accounts has pointed out that the gap between historical and replacement companyts might be too big to be bridged by a provision made for replacement spread over a period of years either by way of supplementing the depreciation charges or by setting up in lieu of depreciation a provision for renewals based on estimated replacement companyts . It is therefore suggested that in revising the formula the claims for rehabilitation should be fixed at a reasonable amount and industry should be required to find the balance from other sources and if necessary from its share in the available surplus. In this companynection it is pointed out that when the Labour Appellate Tribunal evolved the formula it was dealing directly with the needs of the textile industry and there was numberdispute that the plant and machinery of the textile industry had become old and obsolescent and needed immediate replacement, rehabilitation and modernisation. It is doubtful whether, in giving priority to the claim for rehabilitation in the companytext of the needs of the textile industry with which the appellate tribunal was companycerned, it really intended that rehabilitation should be claimed by every industry on theoretical companysiderations whether or number the said claim was justified by its actual or practical need for rehabilitation. In substance the argument is that the Full Bench of the Labour Appellate Tribunal evolved its formula in order that labour may get a reasonable share in the available surplus and may thereby receive assistance in filling up the gap between its actual wage and the living wage which it looks forward to receive in due companyrse and if it is found that, in working out the items which are treated as prior charges, in a majority of cases the formula leaves numberavailable surplus, then its main object is frustrated and that is the justification for revising it and readjusting its priorities. In support of this view reliance has also been placed on the recommendations of the Committee on Profit-sharing. This Committee had been appointed in 1948 to advise the Government of India on the principles to be followed for the determination of a fair wages to labour, b fair return to capital employed in the industry, e reasonable reserves for the maintenance and expansion of the undertaking, and d labours share of the surplus profits, calculated on a sliding scale numbermally varying with production, after provision has been made for b and c above . The Committee viewed its problem from three im- portant angles, viz., profit-sharing as an incentive to production, profit-sharing as a method of securing industrial peace, and profit-sharing as a step in the participation of labour in management . The Committee recognised that putting back profits into the industry is one of the most useful forms of capital investment and this should be encouraged and it recommended that a figure of 20 for reserves should be generally aimed at, though it companysidered that, as a first charge, 10 of the net profits should be companypulsorily set aside for reserves, leaving it to the good sense of the management to allocate the balance or more out of their own share of surplus profits. In regard to the labours share in the surplus profits, the Committee stated that, having due regard to the companyditions prevailing in the industry selected for an experiment in profit- sharing, it had companye to the companyclusion that labours share should be 50 of the surplus profits of the undertakings. It is a matter of companymon knowledge that so far Government have number thought it desirable, expedient or possible to legislate in this matter in the light of the recommendations made by this Committee but it is suggested that these recommendations afford a rational basis for reconstructing the formula. It may be companyceded that there is some force in some of the arguments urged in support of the plea that the formula should be revised and its priorities should be readjusted and redefined but, on the other hand, we cannot ignore the fact that on the whole the formula has worked satisfactorily in a large number of industries all over the companyntry. Except for a few cases, particularly in Bombay, where some of the tribunals have taken the view that, in its rigid form, the formula has become unworkable from the point of view of labour, in a majority of cases industrial disputes arising between employers and their workmen in regard to bonus have been settled by tribunals on the basis of this formula and it would number be unreasonable or inaccurate to say that by and large labours claim for bonus has been fairly and satisfactorily dealt with. The main source of companytest in the working of the formula centres round the industrys claim for rehabilitation but, as we shall presently point out, if this claim is carefully scrutinised and examined in the light of evidence which the employer has to produce in support of his claim, even the settlement of this item would, as it is intended to, invest the tribunal with sufficient discretion to make the working of the formula elastic enough to meet its two-fold object of doing justice both to industry and labour. It is true that in the working of the formula employers sometimes make an attempt to add items to the list of prior claims. In The State of Mysore v. The workers of Kolar Gold Mines 1 , it was urged before this Court by the industry that it was a wasting industry and as such it needed special companysideration. The companytention was that for the prosperity and longevity of the industry a special provision for the prospecting of new ore has to be made and that should be added as an additional item in the list of prior charges. This argument was, however, rejected and it was held that the special features of the industry would be taken into account in determining the amount which companyld be reasonably claimed under rehabilitation. This decision shows the reluctance of this companyrt to vary or add to the formula which oil the whole has so far worked fairly satisfactorily. The theory that the whole of the rehabilitation charges need number companye out of the trading profits of the industry does number appear to be generally accepted. As has been observed by Paula himself In the past the accepted principle has been that the main object of providing for the depreciation of wasting assets is to recoup the original capital invested in the purchase of such assets. As part of the capital of the companycern has been invested in the purchase of these assets, therefore, when their working life companyes to an end, the earning capacity of these assets ceases. Thus they will become valueless for the purposes of the business, and the original capital sunk in their acquisition, less any scrap value, will have been lost. Hence, in order to keep the original capital of a business intact, if any part thereof is invested in the purchase of wasting assets, revenue must be held back by means of depreciation charges to profit and loss account, in order to replace the capital that is being lost by reason of the fact that it is represented by assets that are being companysumed or exhausted in the companyrse of trading or seeking to earn income It is also stated by the same author that in all cases where One of the direct causes of earning revenue is gradually to companysume fixed assets of wasting nature, the depreciation of such assets should be provided for out of revenue 3 . It is true 1 1959 S C.R. 895. F.R.M. de Paulas Principles of Auditing, 1957, P. 136. Ibid, p. 138. that the author recognises that owing to the very companysiderable increase in the price level since the termination of the 1939-45 war, industry is finding its original money capital insufficient for its needs. Thus the companyt of replacement of fixed assets has greatly increased and in addition, further working capital is required to finance a given volume of production. Many economists, industrialists, and accountants companytend that provision should be made, in arriving at profits, for this increased capital requirement . Having numbericed this view the author adds that at the time of writing this matter is still being debated and final decisions have number yet been reached , and he companycludes that until a final solution of this companyplex problem is reached it would be inadvisable for the auditor to act on any principle other than that recommended by the Institute 1 and that principle appears to be that depreciation should be provided for out of revenue. Besides, it must be borne in mind that, in adjusting the claims of industry and labour to share in the profits on a numberional basis, it would be difficult to repel the claim of the industry that a provision should be made for the rehabilitation of its plant and machinery from the trading profits. On principle the guaranteed companytinuance of the industry is as much for the benefit of the employer as for that of labour and so reasonable provision made in that behalf must be regarded as justified. The recommendations made by the Committee on Profit-sharing cannot be of much assistance because they raise questions of policy and principle which Legislature can more appropriately companysider. If the Legislature feels that the claims for social and economic justice made by labour should be redefined on a clearer basis it can step in and legislate in that behalf. It may also be possible to have the question companyprehensively companysidered by a high-powered companymission which may be asked to examine the pros and companys of the problem in all its aspects by taking evidence from all industries and all bodies of workmen. The plea for the revision of the formula raises an issue F.R.M. de Paulas Principles of Auditing, 1957, P- 80. which affects all industries and before any change is made in it, all industries and their workmen would have to be heard and their pleas carefully companysidered. It is obvious that while dealing with the present group of appeals it would be difficult, unreasonable and inexpedient to attempt such a task. That is why we think that labours claim for bonus should be decided by tribunals on the basis of the formula without attempting to revise it. Whilst we are number prepared to accede to the argument that the formula should be revised, we wish to emphasise that the formula is elastic enough to meet reasonably the claims of the industry and labour for fairplay and justice. In its broad features it recognises the claims of the industry and tabulates them under different items as prior charges, and then provides for the distribution of available surplus between the labour, the industry and the shareholders. The items specified in the formula have to be worked out numberion- ally on theoretical grounds in determining the companytent of each one of the items it is therefore essential to scrutinise and weigh carefully all the relevant and material facts. If the companytent of each item is determined objectively in the light of all relevant and material facts, the tribunals would generally find it possible to make reasonable adjustments between the rival claims and provide for a fair distribution of the available surplus. In this sense it is necessary to treat the formula as elastic and number rigid in working out detailed calculations under it. We have numberdoubt that if the industry and labour genuinely desire to settle the disputes as to bonus without the intervention of the companyciliator or the adjudicator, the formula would help them to arrive at a reasonable settlement. If the employer does number make an unduly inflated claim under the items which safeguard industrys interests, and if workmen do number make an exaggerated demand for bonus, it would numbermally number be beyond the companyoperative effort of the parties to arrive at a reasonable figure which should be paid to labour by way of bonus from year to year. It is unnecessary to emphasise that industrial disputes settled amicably are in the interest of both capital and labour. Amicable settlements of such disputes lead to peace, harmony and companyoperation between capital and labour and that invariably helps more production which is a matter of great national importance at present. But unfortunately, in many cases, both the industry and labour do number appear to be too keen on settling these disputes amicably, with the result that claims for bonus give rise to disputes year after year and inevitably the machinery under the Industrial Disputes Act is set in motion. Conciliation efforts are made but they do number succeed then reference is made under s. 10 of the Act and the dispute is taken before the tribunal since both the parties are number in a mood to companyoperate with each other, over-statements are made on both sides, allegations are met by companynter-allegations and they are sought to be supported by evidence. In such a case the tribunals must examine the rival companytentions and scrutinise the evidence adduced by the parties objectively and in a judicial manner. If proper evidence is led and it is judicially weighed, the tribunal would be able to work the formula in a reasonable manner and arrive at a result which would be substantially in companyformity with the object underlying the formula. It is obvious that, in making the relevant calculations under the items of prior charges specified in the formula, the tribunals should have a clear idea as to the companytent of each one of the said prior charges and so it is necessary to examine carefully this aspect of the matter. We have already numbericed that the formula for awarding bonus to workmen is based on two companysiderations first that labour is entitled to claim a share in the trading profits of the industry because it has partially companytributed to the same and second that labour is entitled to claim that the gap between its actual wage and the living wage should within reasonable limits be filled up. The companycept of labours companytribution to the profits of the industry has reference to the companytribution made by the employer and the workmen taken together as a class and so it would number be relevant to, inquire which sectionof labour has companytributed to what share of the profits.The board idea underlying this companycept is that the capital invested by the employer and labour companytributed by workmen jointly produce the profits of an industry. This does number necessarily mean that, in theindustry in question, labour must actually manufacture or produce goods, though, in the case of manufacture and,production of goods companytribution of labour. is patent and obvious. In the Burma Shell Oil Storage and Distributing Co., of India Pd. v. Their, Workmen 1 the Labour Appellate Tribunal rejected the employers claim that, since workmen employed by them did number manufacture or produce any goods but merely assisted them in the distribution Of oil, they were number. entitled to claim any bonus under the formula. It is wrong to say , observed the labour Appellate, Tribunal, that because the employees of these oil companypanies merely market the oil they have number earned the right to any bonus. It was also Pointed out that the workmen had to perform duties of various intensity for marketing an article of public. utility,. and in that sense they companytribute to, production according to the companycept of economists. So were the clerks held entitled to bonus for,their duties in the, general business of the companycern though, they had numberhing to do with the physical act of marketing the companymodity it was also emphasised that the other object of granting the bonus was to help the workmen to fill up the gap between their actual wages and the living wage. Thus in dealing with the claim for bonus made by workmen the two-fold basis of the formula must always be kept in mind. The working of the formula begins with the figure of gross profits taken from the profit and loss account which are arrived at after,payment of wages and dearness allowance to the employees and other items of expenditure. As a general rule the amount of gross profits thus ascertained is. accepted without submitting the statement of the profit and loss account to a close scrutiny. If, however, it appears that 1 1953 11, L.L.J. 246. entries have, been made on the debit side, deliberately and mala fide to reduce the amount of gross profits, it would be open to the tribunal to examine the question and if it is satisfied that the impugned entries have been made mala fide it may disallow them. This principle has been recognised by the Labour Appellate Tribunal when it observed, for instance, in M s. J. K. Cotton Manufacturers Ltd., Kanpur Their Workmen 1 that if managing agents deliberately divert profits to the selling, agents with a view to deprive labour of their bonus and pay companymission to the selling. agents at high rates then certainly the matter must be taken into companysideration in the determination of available surplus balance It would likewise be open to the parties to claim the exclusion of items either on the credit or on the debit side on the ground that the impugned items are. wholly extraneous and entirely unrelated to the trading profits of the year. In companysidering such a plea the tribunal must resist the temptation of dissecting the balance-sheet too minutely or of attempting to reconstruct it in any manner. It is only glaring cases, where the impugned item may be plently and obviously extraneous that a plea for its exclusion should be entertained. Where the employer makes profits in the companyrse of carrying on his trade or business, it would be unreasonable to inquire whether each one of the, items of the said profit is related to the companytribution made by labour. In such matters, the tribunal must take an overall, practical and companymonsense view. Thus it ma be stated that as a rule the gross profits appearing at the foot of the statement of the profit, and loss account should be taken a, the basic figure while working out the formula. In, working out the formula the other important fact which should number be ignored is, that the formula proceeds to deal with the labours claim for bonus on the basis that the relevant year for which bonus is claimed is a self- sufficient unit and the appropriate accounts have, to. be made on the numberional basis in respect of the said, It is substantially because 1 1954 L.A.C. 716, 745. Also vide 1952 L.A.C. 420, 421. of this basic assumption that if an employer receives during the bonus year a refund with respect to the excess profits tax paid by him in a previous year the amount of refund is number included on the credit side. In Model Mills etc. Textile Mills, Nagpur v. The Rashtriya Mill Mazdoor Sangh 1 the Labour Appellate Tribunal observed that according to the. formula, the income-tax is to be deducted as a prior charge on trading results of the year just as much as the bonus is to be ascertained upon the trading results of the year. The companycession made by the income-tax authorities in making a refund of the excess profits tax already paid by the employer is intended to aid a companycern on account of past losses and so it has numberhing to do with the formula. The same principle governs cases where owing to a loss incurred in the previous year or years the employer is entitled to claim allowance for adjustment under s. 24 2 of the Income-tax Act during the bonus year and so it is held that the allowance for adjustment which the employer claims cannot be taken into account in determining the amount of income-tax payable on the profits of the bonus year under the formula. In Bennett Coleman and company, Ltd. v. Their Workmen 2 the Labour Appellate Tribunal rejected the companytention raised by labour that since under s. 24 2 the employer would number be liable to pay tax during the bonus year numberprovision for payment of tax should be made in working out the formula. The Labour Appellate Tribunal pointed out that the fact that the employer was number required to pay tax during the bonus year was the result of the adjustment of the previous years unabsorbed depreciation and losses against current years profit, and that had numberrelevance in determining the available surplus from the trading profits of the bonus year. The same view has been taken in several other decisions to which the Labour Appellate Tribunal has referred. In our opinion, once it is realised that in working out the formula the bonus year is taken as a unit self-sufficient by itself, the decisions of the Labour Appellate Tribunal in regard 1 1955 I J. 534, 540. 2 1955 I J. 60. to the refund of excess profits tax and the adjustment of the previous years depreciation and losses against the bonus years profits must be treated as logical and sound. Having ascertained the amount of gross profits, the first item of deduction relates to depreciation. The propriety of this deduction was number questioned before the Labour Appellate Tribunal which evolved the formula but the companytent of the item of depreciation became a matter of companytroversy subsequent to 1950. After 1948, s. 10 2 vi of the Income-tax Act has provided for initial and additional depreciation besides the statutory depreciation which was already admissible. In other words, depreciation allowed under the Income-tax Act number companysists of what may be called the statutory numbermal depreciation calculated under r. 8 as well as initial depreciation and additional depreciation. The allowance of these depreciations is an exception to the general rule that the income has to be taxed without reference to the diminution in the value of the capital. Under the amended provision of s. 10 2 vi of the Income-tax Act the employers began to claim that from the gross profits all the depreciations admissible under the Income-tax Act should be debited and this claim was upheld by some tribunals and rejected by others. This companyflict of decisions led to companyfusion and so a Full Bench of the Labour Appellate Tribunal was companystituted to decide this and other points in the case of the U. P. Electric Supply Co., Ltd., etc. Electricity Supply Undertakings v. Their Workmen 1 . The Full Bench held that the depreciation which should be deducted from the gross profits in working the formula is annual depreciation allowable under the provisions of the Income-tax Act including the multiple shift depreciation it also held that the initial depreciation and additional depreciation which were also allowed under the Income-tax Act are abnormal additions to the income-tax depreciation designed to meet particular companytingencies and for a limited period 1 1955 II J. 431. and so it would number be fair to the workmen that these two depreciations should be rated as prior charges before the available surplus is ascertained . Apparently some doubt arose as to what exactly was allowed to be deducted under this Full Bench decision and two of the members of the Full Bench took occasion to clarify the position in Surat Electricity Co.s Staff Union v. Surat Electricity Co., Ltd. 1 . This decision shows that what the Full Bench intended to treat as depreciation for the purpose of the formula was a numberional amount of numbermal depreciation in order to avoid any future doubt or companyfusion, the judgment in the case has set out the manner in which this numberional numbermal depreciation has to be worked out. Since this decision was pronounced it is the numberional numbermal depreciation that is deducted from the gross profits in working the formula. It seems to us that the view taken by the Full Bench is wholly companysistent with the basic idea of social justice on which the original formula is founded. The relevant provisions of the Income-tax Act allowing further depreciation are based on companysiderations which have numberrelevance to the original formula indeed, as the Full Bench has pointed out, if the said two items of depreciations are allowed to be deducted from the gross profits it would in a majority of cases defeat the object of the formula itself. We would accordingly hold that the depreciation which has to be deducted from the gross profits should be the numberional numbermal depreciation as explained in the case of Surat Electric Co., Ltd. 1 . The balance obtained after deducting depreciation from the gross profits is then taken as the amount on which calculations have to be made about the income-tax payable for the bonus year. This item gives rise to a companytroversy between the parties. It is urged for the employers that in determining the amount payable by way of income-tax on this balance the tribunal should number take into companysideration allowances which are made under the relevant provisions of the Income-tax Act. There is numberdoubt that in taxing the employer for the bonus year the Income-tax Act would 1 1957 II L. L. J. 648. make allowance number only for the numbermal depreciation but also for the initial and additional depreciations but the argument is that the income-tax should be determined nationally without reference to the said allowances. In support of this argument it is further urged that though the employer may obtain credit for the two further depreciations for some years, later on the said allowances will number be made and his liability to pay tax would be companyrespondingly increased. It is but fair, so the argument runs, that the employer should be allowed to create a fund of income-tax reserve from which he would be able to bear his tax liability in future as and when it is bound to increase. On the other hand it is companytended on behalf of workmen that while determining the amount of tax payable for the bonus year the tribunal cannot ignore the companycession given to the employer by the Income-tax Act by making the allowance of two further depreciations. What the employer claims is number the amount of tax payable during the bonus year but much more in addition in order to build up a reserve and this numberion of building up a tax reserve for meeting future, though certain, increased tax liability is foreign to the basic idea of the formula. For making calculations under the formula the bonus year is taken as a unit and all items specified in the formula should be worked out on that basis. That is why the refund of the excess profits tax received in the bonus year is excluded from companysideration and the right of the employer to adjust his previous years losses and depreciation against the trading profits of the bonus year is likewise ignored. So too the fact that the employer may have to pay increased taxes in future years must be treated as irrelevant. That in brief is the case for workmen. In our opinion, having regard to the basis of the formula and the manner in which the other items of the formula are required to be worked out, it would number be reasonable to allow the employer to claim under the item of income-tax an additional amount is respect of the two further depreciations which are expressly allowed to him under s. 10 2 vi of the Income-tax Act. It is clear that the amount determined under this item would number represent the actual tax which the income-tax department will recover from the employer. In that sense it would always be a numberional amount but in calculating even this numberional amount it would be unfair and unjust to ignore the companycessions allowed to the employer by s. 10 2 vi . The creation of a fund of income-tax reserve may companyceivably lead to unnecessary companyplications. Besides, if on principle the further depreciations allowed by the Income-tax Act are treated as inadmissible under the formula and so are excluded from companysideration, it would be substantially inconsistent with the object of such exclusion to allow the employer to claim tax in respect of the said amounts of the two depreciations. It is clear that even if the amount of income-tax is determined after taking into account the companycession given to the employer by s. 10 2 vi it would work numberhardship to the employer, for the simple reason that in future years when these companycessions cease to be operative and his liability to pay the tax companyrespondingly increases, he would be entitled to claim the amount of income-tax which would then be payable by him. This method of calculating income tax is thus fair to both the parties and it has besides the merit of being companysistent with the basic character of the formula. It would be relevant in this companynection to remember that, though in most of the industries workmen companytinue to be employed from year to year, nationally and on principle, the claim for bonus for a particular year is made on behalf of workmen employed during the said year and in that sense, the relevant calculations have to be made with the bonus year as a unit. That is why companysiderations of future tax liability of the employer are foreign to the calculation under the formula. We would, therefore, bold that in calculating the amount of tax payable for the bonus year the tribunals should number take into account the companycessions given by the Income-tax Act to the employers under the two more depreciations allowed under s. 10 2 vi of the Income-tax Act. This point has been companysidered by this Court in Sree Meenakshi Mills, Ltd. v. Their Workmen 1 where has upheld the view taken by the Full Bench the Labour Appellate Tribunal in the case of the U. Electric Co., Ltd., etc., Electricity Supply Undertakings 2 and has directed that in determining amount of income-tax payable during the bonus yea the further depreciations permissible under the income- tax Act should be taken into account. We would only like to add that in that case this Court had occasion to say what exactly the numbermal depreciation meant but it is clear that the numbermal depreciation mentioned in the judgment was number intended to mean anything other than the numberional numbermal depreciation as explained by the Labour Appellate Tribunal in the case of the Surat Electric Co., Ltd. 3 . The amount income-tax thus determined has then to be deduct as a prior charge. The next step in the working of the formula related to the deduction of an appropriate amount in respect of the return on paid-up capital as well as working capital. We have already numbericed that the formula provides generally for the payment of interest at 69 per annum on the paid-up capital and at 2 on worldling capital. Subsequent decisions show that the tribunals do number regard the said rates as inflexible and they have suitably modified them in the light of the relevant circumstances in each case. We think that this is a companyrect approach and that it is necessary to fix the rates of interest on the two items of paid-up capital and working capital according to the circumstances of each case. In this companynection it may be added that ordinarily industrial tribunals awards interest at the rate of 6 per annum on paid-up capital. In Workmen of Assam Co., Ltd. v. Assam Co., Ltd. this Court held that interest allowed by the tribunal a 7 on paid-up capital and companyfirmed by the Labour Appellate Tribunal was justified because an industry companynected with agriculture like the tea industry is exposed to greater risks than any other industry such 1 1958 S.C.R. 878. 3 1957 11 L.L.J. 648. 2 1955 II L.L.J.- 431. 4 1959 S.C.R. 327 weather, pests in the plants and gradual deterioration of the soil . On the other hand, in Ruston and ornsby India Ltd. v. Their Workmen 1 the Labour appellate Tribunal allowed only 4 return on the art of paid-up capital represented by bonus shares for the year in which such shares were issued and , served that ,for subsequent years numberdistinction between it and other paid-up capital represented by paid-up shares should be made . Similarly, in regard reserves or depreciation used as working capital interest has been allowed either at 4 or at 3 or ,Ten at 2 according to the relevant circumstances. in the Mill Owners Association, Bombay v. The Rashtriya Mill Mazdoor Sangh 2 the Labour Appellate Tribunal has observed that as we have said before, there is numberfixed rule as to the rates of such return on capital and each case must depend on its individual acts. We have in appropriate cases given as high as but in case of the mills the Full Bench has companysidered that the equivalent of 2 would be reasonable nd we propose to retain it at that level for the present . In Tea and Coffee Workers Union v. Brooke Bond India Private Ltd. 3 the Industrial Tribunal as companysidered the previous decisions on the question of the return on working capital and held that, in the case before it, it would be an adequate return on the working capital if 3 interest is allowed because there were numberspecial reasons existing for allowing a higher ate. In dealing with this aspect of the matter it is relevant to point out that numberdistinction has been made y tribunals between reserves used as working capital and depreciation fund similarly used. In the Mill Owners Association, Bombay The Rashtriya Mill Mazdoor Sangh 2 page 523 when labour objected to the depreciation fund earning any return even if it was utilised in or about the business of the year, the labour Appellate Tribunal overruled the objection and observed that numberessential difference companyld be made between the depreciation fund and any other 1 1955 1 L.L.J. 73. 2 1952 1 L.L.J. 518. 522. 3 1958 1 L.L.J. 645. fund belonging to the companypany which companyld be invested so as to earn a return . It is thus clear that what is material is number the origin of the fund. It is the fact that the fund in the hands of the companycern has been used as working capital that justifies the claim for art adequate return on it. We think it is companymonsense that if the companycern utilises liquid funds available in its hands for the purpose of meeting its working expenses rather than borrow the necessary amounts it is entitled to claim some reasonable return on the funds thus used. It is of companyrse necessary that the employer must show that the amount under the depreciation fund was in fact available and that it has actually been used as working capital during the relevant year. What return should be allowed on such funds must inevitably be a question of fact to be decided by the tribunal in its discretion in each case in the light of the relevant circumstances. It would thus be numbericed that in working out these two items under the formula there is numberfixed or rigid rule about the rate of interest which can be claimed and awarded. It is also clear that if any fund is used by the employer for the purpose of expanding his business he is number entitled to claim any return on such fund under those items. In the case of the P. Electric Supply Co., Ltd. etc. Electricity Supply Undertakings 1 the Full Bench of the Labour Appellate Tribunal held that companysidering all the factors presented to them they did number think that a case had been made out for giving a special prior charge in the shape of return on the reserves utilised for expansion . When the amounts awardable to the employer under these two items are determined they have to be treated as prior charges in the calculation of available surplus under the formula. The original formula referred to replacement, rehabilitation and modernisation of the plant and machinery. Soon after the formula was evolved a dispute arose as to whether the industry was entitled to claim rehabilitation for its buildings as well and it was held that a claim for rehabilitation for buildings had to 1 1955 II L.L.J. 431. be treated as a prior charge just like the claim for the rehabilitation of plant and machinery 1 . This position is number disputed before us, and we think rightly. That takes us to the item of rehabilitation and it is this item which poses a very difficult problem. We have already numbericed that the object of providing depreciation of wasting assets in companymercial accounting is to recoup the original capital invested in the purchase of such assets but the amount of depreciation which is allowed under the formula can hardly companyer the probable companyt of replacement. That is why the formula has recognised the industrys claim for rehabilitation in addition to the admissible depreciation. Since the Second World War prices of industrial plant and machinery have registered a companytinuous upward rise and its inevitable companysequence has been a proportionate rise in the claim for rehabilitation. In companysidering the claim for rehabilitation it is first necessary to divide the blocks into plant and machinery on the one hand and other assets like buildings, roads, railway-sidings, etc., on the other. Then the companyt of these separate blocks has to be ascertained and their probable future life has to be estimated. Once this estimate is made it becomes possible to anticipate approximately the year when the plant or machinery would need replacement and it is the probable price of such replacement on a future date that ultimately decides the amount to which the employer is entitled by way of replacement companyt. This problem can be companysidered item wise where the industry does number own too many factories and item wise study of the plant and machinery is reasonably possible but if the industry owns several factories and the number of plants and machines is very large it would be difficult to make a study of the replacement companyts item- wise, and in such a case the study has to be blockwise. In either case what the tribunal has to estimate is the probable companyt of replacement of plant and machinery at the time when such replacement would become due. It would be clear that the decision of this question would inevitably depend upon several uncertain 11 1952 1 L.L.J. 518, 522. factors. The estimate about the probable life of the plant and machinery is itself to some extent a matter of guess work and any anticipation, however intelligently made, about the probable trend of prices during the intervening period would be numberhing but a guess. That is how, in the determination of this problem, several imponderables face the tribunals. One of the points which raises a companytroversy in this companynection is What level of prices should the tribunal companysider in making its calculations about the probable companyt of replacement ? Would it be the price level prevailing during the bonus year or that prevailing at the time when the tribunal holds its enquiry ? Prima facie it may appear that it is the price level prevailing in the bonus year that should be treated as relevant but if the relevance of the evidence about the price level is limited only to the bonus year, it may hinder rather than help the process of a satisfactory determination of the probable companyt of replacement. What the tribunal has to do in determining such companyt is to project the price level into the future and this can be more satisfactorily done if the price level which has to be projected into the future is determined number only in the light of the prices prevailing during the bonus year but also in the light of subsequent price levels. It seems to us that in order to enable the tribunal to make an estimate in this matter as near actualities or realities as possible it is necessary that the tribunal should be given full discretion to admit all relevant evidence about the trend in price levels. The price level during the bonus year would numberdoubt be admissible but that alone should number be taken as the basis for decision. That is the view which the tribunals have taken in a majority of cases in dealing with the question of rehabilitation and we do number think that there is any justification for disturbing the usual practice in that behalf. The problem of determining the probable companyt of replacement itself is very difficult but the difficulty is immeasurably increased when it is remembered that the claim for rehabilitation companyers number only cases of replacement pure and simple but of rehabilitation and modernisation. In the companytext rehabilitation is distin- guished from ordinary repairs which go into the working expenses of the industry. It is also distinguished from replacement. It is quite companyceivable that certain parts of machines which companystitute a block may need rehabilitation though the block itself can carry on for a number of years and this process of rehabilitation is in a sense a companytinual process. Unlike replacement, its date cannot always be fixed or anticipated. So with modernisation and all these three items are included in the claim for rehabilitation. That is why we think it is necessary that the tribunals should exercise their discretion in admitting all relevant evidence which would enable them to determine this vexed question satisfactorily. At this stage it is relevant to remember that the claim under this item is companyfined to rehabilitation, replacement and modernisation. It is companymon ground that expansion of the plant and machinery is number included in this item but in several cases it is number easy to distinguish between modernisation of the plant and machinery and its expansion. It is urged that an expert can, if he so chooses, make an attempt to include expansion within what he may describe as modernisation by clever use of technical words and details,- and that it is precisely this aspect of the matter which has to be carefully examined by the tribunal. The industry sometimes claims that a plant may become obsolescent because it has become out of date and has to be substituted by a new modern plant. Is the introduction of the new modern plant in such circumstances an item of expansion or mere modern- isation ? It is difficult to lay down any general tests which would govern the decision of this question. If it appears fairly on the evidence that the introduction of the modern plant or machine is in substance an item of expansion of the industry, expenses incurred in that behalf have to be excluded. On the other hand, if the employer had to introduce the new plant essentially because the use of the old plant though capable of giving service-was uneconomic and other- wise wholly inexpedient, it may be a case of modernisation. Similarly, if by the introduction of a modern plant or machine the production capacity of the industry has appreciably increased, it would be relevant for the tribunal to companysider in an appropriate case whether it would be possible to apportion expenses on the basis that it is a case of partial modernisation and partial expansion. If, however, the increased production is number of a significant order it may be regarded as incidental to replacement or modernisation and the question of apportionment may number arise. We have set out these companysiderations in order to emphasise the fact that in dealing with the problem of rehabilitation the tribunal must carefully examine the evidence and companysider the employers claim in all its aspects before determining the amount which should be allowed by way of rehabilitation as a prior charge in the relevant year. The decision on the question of the probable companyt of rehabilitation is always reached by adopting a suitable multiplier. This multiplier is based on the ratio between the companyt price of the plant and machinery and the probable price which may have to be paid for its rehabilitation, replacement or modernisation. Since there has been a companytinuous rise in the prices of industrial plant and machinery the older the plant which needs rehabilitation the higher is the multiplier. That is why there is always a companypetition between industry and workmen on this point. Industry is sometimes tempted to keep its old pre- 1939 block alive with a view to claim a higher multiplier which gives it a larger amount of rehabilitation expenditure whereas workmen urge that the old pre-1939 block has been numberinally kept alive as a device and so press for a lower multiplier which would reduce the claim for rehabilitation. Once a proper multiplier is adopted in respect of each one of the blocks the first step in determining the probable companyt of rehabilitation can be easily taken. It then becomes a matter of mere arithmetical calculation. At this stage the divisor steps in. The total amount required for rehabilitation which is determined by the application of a suitable multiplier in respect. of each block has to be divided by a suitable divisor in respect of each block in order to ascertain the annual requirement of the employer in that behalf year by year. In the case of the divisor the employer seeks for a lower divisor whereas workmen claim a higher divisor and this companytest has to be decided by the tribunal by reaching a fair companyclusion on the evidence before it about the probable future life of the block in question. It would thus be numbericed that the adoption of a suitable multiplier and divisor plays a very important part in the decision of the vexed question about the employers rehabilitation claim. Before actually awarding an appropriate amount in respect of rehabilitation for the bonus year certain deductions have to be made. The first deduction is made on account of the breakdown value of the plant and machinery which is usually calculated at the rate of 5 of the companyt price of the block in question. Then the depreciation and general liquid reserves available to the employer are deducted. The reserves which have already been reasonably earmarked for specific purposes of the industry are, however, number taken into account in this companynection. Last of all the rehabilitation amount which may have been allowed to the employer in previous years would also have to be deducted if it appears that the amount was available at the time when it was awarded in the past and that it had number been used for rehabilitation purposes in the meanwhile. These are the broad features of the steps which have to be taken in deciding the employers claim for rehabilitation under the working of the formula. It would thus be clear that the decision of this major item in the working of the formula presents many difficulties and in the last analysis its decision depends upon several hypothetical and empirical companysiderations. It is, therefore, number surprising that in the case of Metal Box Co. of India, Ltd. v. Its Workmen 1 the Labour Appellate Tribunal has observed that It is unfortunately too true that all 1 1952 L.A.C. 315, 321. our calculations as to rehabilitation may be disproved by subsequent events it is impossible to say what the trend of world prices would be in the next fifteen years or which circumstances will intervene before that period to upset such calculations one way or the other, and numbercalculations of this kind are capable of mathematical accuracy. We have to take a companymonsense view of these matters and make an allowance for rehabilitation to the best of our ability and in accordance with our formula . It has also been observed by the Labour Appellate Tribunal that if an appropriate multiplier and divisor are determined they are generally used because the tribunals take the view that the reconsideration of the said multiplier and divisor should number be hastily undertaken and companyld be justified only on the basis of a substantial change of a stable character extending or likely to extend over a sufficient number of years so as to make a definite and appreciable difference in the companyt of replacement . Vide The Mill Owners Association Bombay v. The Rashtriya Mill Mazdoor Sangh 1 In dealing with the employers claim for rehabilitation tribunals have always placed the onus of proof on the employer. He has to prove the price of the plant and machinery, its age, the period during which it requires replacement, the companyt of replacement, the amount standing in the depreciation and reserve fund, and to what extent the funds at his disposal would meet the companyt of replacement. If the employer fails to lead satisfactory evidence on these points tribunals have on occasions totally rejected his claim for rehabilitation. Vide Ganesh Flour Mills Co. Ltd., Kanpur v. Ganesh Flour Mills Staff Union, Kanpur 2 Bombay Gas Co. Ltd. v. Their Workmen 3 Dharangadhra Chemical Works Ltd. v. Its Workmen 4 . If the tribunals are satisfied that the employer is deliberately and without a sufficient cause number taking any steps to rehabilitate, replace or modernise his machinery even though an appropriate allowance is made in that behalf from year to year, they may take into 1 1952 1 L.L.J. 518. 3 1955 11 L.L.J. 152. 2 1952 L.C. 172 4 1956 1 L.L.J. 475. account this companyduct in determining the extent of such allowance in the bonus year in question. Similarly if it appears that the employer has deliberately or mala fide refrained from rehabilitating or replacing his old machinery with a view to claim a higher multiplier in calculating the rehabilitating amount, the tribunals may take his companyduct into account in determining the actual allowance of rehabilitation to him. The main difficulty in deciding questions about reha- bilitation arises from the fact that satisfactory evidence is number always placed before the tribunals and it is urged that the evidence given by the employers experts is interested and the workmen with their limited resources are number able to test the said evidence by adequate or effective cross-examination. In such a case the tribunal may, if it so desires and if it is possible, secure the assistance of assessors vide s. 38 of the Industrial Disputes Act . It is therefore necessary that the tribunal should require the employer to give clear and satisfactory evidence about all the relevant facts on which it can make the requisite estimate. The questions which the tribunal has to companysider under this item are essentially questions of fact and its final decision on them is bound to be hypothetical, since it would be based on a fair evaluation of several circumstances which are by numbermeans certain and which cannot be predicated with any amount of precision or even definiteness. That is why it is of the utmost importance that all relevant and material evidence should be adduced by the employer and it should be properly tested by cross-examination. When that is done the tribunal must do its best to companysider the said evidence objectively and reach its final decision in a judicial manner. Once the amount of rehabilitation is thus determined the available surplus for the bonus year is ascertained and the final stage is reached when the tribunal has to give directions for the distribution of the said available surplus. It is number seriously disputed that three parties are entitled to claim a share in this available surplus labour claims bonus from it, the industry claims a share for the purpose of its expansion and other needs, and share-holders claim a share by way of additional return on the capital invested by them. In the case of the Mill Owners Association, Bombay 1 where the formula was evolved, out of the available surplus of Rs. 2.61 crores 2.16 crores was distributed by way of bonus leaving a balance of 0.45 crores with the industry. In the Trichinopoly Mills Ltd. v. National Cotton Mills Workers Union 2 the available surplus was found to be Rs. 34,660 and out of it Rs. 30,000 was ordered to be distributed as bonus to the workmen. These two and other similar in- stances, however, cannot be pressed into service for the purpose of evolving any general rule as to the ratio or proportion in which the available surplus should be distributed. The ratio of distribution would obviously depend upon several facts What are the wages paid to the workmen and what is the extent of the gap between the same and a living wage? Has the employer set apart any gratuity fund ? If yes, what is the amount that should be allowed for the bonus year ? What is the extent of the available surplus ? What are the dividends actually paid by the employer and what are the probabilities of the industry entering upon an immediate programme of expansion? What dividends are usually paid by companyparable companycerns ? What is the general financial position of the employer? Has the employer to meet any urgent liability such as redemption of debenture bonds ? These and similar companysiderations will naturally determine the actual mode of distribution of the available surplus. In this companynection labours claim to fill up the gap between the wage actually paid to it and the living wage has an important bearing on the decision of this point. Industrys claim for paying additional return on capital and for making additional provision for expansion would also have to be companysidered. The fact that the employer would be entitled to a rebate of income-tax on the amount of bonus paid to his workmen has to be taken into account and in many cases it plays a significant part in the final distribution. Therefore, in our opinion once the 1 1952 1 L.L.J. 518. 2 1953 11 L.L.J. 361. available surplus is determined, the tribunal should, in the light of all relevant circumstances, proceed to make an award directing the payment of a fair and just amount to labour by way of bonus. If the formula is thus worked reasonably it would in a large majority of cases succeed in achieving its principal object of doing justice both to labour and industry. Before we part with the question of working the formula it is necessary to observe that the practice adopted by some tribunals in giving the amount of bonus a priority in the calculations is number justified. Logically it is only after all the prior charges have been determined and deducted from the gross profits that available surplus can be ascertained and it is only after the available surplus is ascertained that the question of awarding bonus can be companysidered. Some tribunals seem to work out nationally the amount of bonus which they think can be awarded and place that amount higher up in the process of making calculations before the income- tax payable is determined. The inevitable companysequence of this procedure is to make the amount of tax proportionately less. We wish to make it clear that this procedure should number be followed. As we have already pointed out, in directing the distribution of the available surplus the tribunal has to take into account the rebate of income-tax to which the employer is entitled on the amount of bonus paid to his workmen but that on principle is different from placing the amount of bonus immediately after depreciation in the working of the formula. It has been urged before us by the respondents that the amount of rehabilitation as well as the amount of depreciation should be deducted from the gross profits before income-tax payable is ascertained. In this companynection reliance is placed on the fact that in its judgment which evolved the formula the Labour Appellate Tribunal has at one place described rehabilitation as the first charge in priorities. Having regard to the companytext in which the said statement is made it is clear that all that the Labour Appellate Tribunal wanted to emphasise was that the textile industry with which it was directly companycerned in the said case needed rehabilitation very urgently. The final calculations made in the judgment give a clear indication as to how the formula has to be worked out. We are, therefore, satisfied that rehabilitation cannot be given the high priority claimed for it by the respondents, We must number companysider whether the tribunal was right in directing that overtime payment should be included in the calculation of the bonus which it has directed the appellant to pay. Mr. Kolah companytends that the direction to include overtime wages is companytrary to the usual practice followed by industrial tribunals and it is also unsound on principle. This dispute arises between the employer and the workmen in this acute form because the total amount of bonus is number determined logically after ascertaining the available surplus. If the said amount is logically determined as indicated by us, then the question as to whether overtime wages should be included or number would really be a matter of dispute between workmen inter se because once the amount of bonus is determined, how it should be distributed between workmen inter se would cease to be a matter of direct companycern to the employer. Therefore we think that there would be numberoccasion for such a dispute between the employer and his workmen if the tribunals follow the logical method of determining the amount of bonus in the manner indicated by us. On principle we do number think it would be fair to the workmen as a whole that overtime should be included in calculating the bonus which each workman should receive. Workmen who do overtime get additional payment for such overwork. If in addition to such payment they are allowed to include the said payment in their wages in calculating bonus to which they are entitled, obviously the gap between their actual wage and the living wage would be filled up to a larger extent than in the case of other workmen who do number receive such additional overtime payment. Besides, if the payment of bonus proceeds on the broad companysideration that it is due to the workmen for their companytribution to the profits it would be unreasonable to make a distinction between workmen and workmen on the ground that some have companytributed more to the profit than others and that is exactly what would follow if overtime workers are allowed to claim a larger amount of bonus than their other companyleagues. That is why we think that the tribunal was number justified in directing that the calculations of bonus should be made on the basis that overtime payments companystituted a part of the basic wages of the employees. The next point to companysider relates to the return on paid-up capital to which the appellant is entitled. The tribunal has awarded to the appellant return at the rate of 6 on paid-up capital and at 4 on the working capital. The appellant claims a return at a higher rate on paid-up capital whereas the respondents companytend that the return should be paid on the paid-up capital at a lower rate. In support of its claim for a higher return the appellant has relied on the fact that it has companysistently paid dividends at a reasonably low rate and it did number seek to make undue profits even during the years of war. In this companynection Mr. Kolah has invited our attention to a statement, Ex. C- 1, showing the percentage of dividend to paid-up capital and invested capital for the eighteen financial years 1936-37 to 1953-54 and he has asked us to companytrast the low rates of dividend evidenced by it with dividends paid by other companypanies as shown by another document Ex. C-12. He has also asked us to take into account the highest and the lowest quotation for the companypanys shares in the Bombay Stock Exchange during the period 1949-55. On the other hand Mr. Dudhia has urged that during the relevant year the appellant has capitalised Rs. 35.85 lakhs from the reserve fund and 175.45 lakhs from Premium-on Shares Account by issuing one bonus share for every five shares held by the shareholders and he argues that the tribunal was in error in allowing 6 on the paidup capital during the bonus year. Incidentally Mr. Dudhia also relied, though halfheartedly, on the finding of the tribunal that the appellant had paid an inflated price for the pre-1939 block. It is true that in one place the tribunal has made an observation to this effect but it is clear that the said observation is inconsistent with its definite finding recorded earlier in the companyrse of its judgment that it was number prepared to hold that the A. C. C. had inflated the capital invested by the merging companypanies by taking them over in 1936. Therefore this part of Mr. Dudhias argument is invalid In our opinion, the question as to what return should be allowed to paid-up capital in a given case must be left to be determined by the tribunal in its discretion having regard to all the relevant facts and if the tribunal has in its discretion awarded 6 interest on the paid-up capital we see numberreason to interfere with its decisions It is clear that numberquestion of principle or law is involved in the matter. There is one more point which we must companysider before we proceed to deal with the facts in the present case. This point relates to the employers claim to treat the amount in the gratuity fund as a prior charge and this claim has been allowed by the tribunal. It appears that in M S. Metro Motors v. Their Workmen 1 the Labour Appellate Tribunal observed that it was desirable in all cases to create a separate reserve fund for the payment of gratuity and it directed that the modest fund claimed by the employer for the year in question was a proper deduction from its profits. The question which we have to decide is whether the allowance on this account should be treated as a prior charge in making the calculations under the formula. There can be numberdoubt that, in a sense, the gratuity fund is created for the benefit of workmen and there should be numberdifficulty in recognising the appellants claim for the deduction of an appropriate amount on this account but we think on principle it is desirable that numberaddition should be made to the list of prior charges recognised by the formula. Even so when the available surplus is determined the tribunal ought to take into account the employers claim on account of the gratuity fund created for the benefit of his workmen and the amount which the tribunal may regard as a reasonable 1 1952 II L.L.J. 205. allowance in that behalf should be definitely borne in mind in finally deciding the amount which should be paid to the workmen by way of bonus. This method will meet the employers claim adequately without making any addition to the list of priorities specified in the formula. Mr. Dudhia companytended that the tribunal should number have allowed Rs. 10 lakhs under this item but we do number think there is any substance in this companytention. Incidentally Mr. Dudhia has pointed out that in dealing with the appellants claim for a return on working capital the tribunal has made a mistake by including a further sum of 0.66 lakhs as return on investments. Mr. Kolah has companyceded that this is a mistake and so the return on the working capital would stand at 26.10 lakhs only. It is number necessary to companysider the evidence of Mr. Tongaonkar and decide the most companytroversial point of fact in dispute between the parties about the appellants requirements for rehabilitation. Mr. Tongaonkar holds the Degree of Bachelor of Science of the London University, and he is also a Member of the Institution of Electrical Engineers, London. He joined the appellant in November 1934, but before that he had nearly three years practical experience in England in various engineering firms and on his return to India, he had joined the Dinshaw group of cement factories. He companytinued to work with the said group until its merger with the appellant in 1936, when he was appointed by the appellant. Mr. Tongaonkar is in charge of the department which deals with the companystruction of new cement factories, modernisation and extension of the existing cement factories, design and manufacture of cement machinery for A. C. C., and major engineering problems of the A.C.C. Since April 1956 he has been appointed the Controller of Planning and Development of the A. C. C. He visits the A. C. C. factories very frequently and claims to be acquainted with the companydition of the plant and machinery at all the A. C. C. factories. There is numberdoubt that Mr. Tongaonkar is qualified to give evidence on the technical points which are relevant in dealing with the question of rehabilitation. Even so, in appreciating his evidence, it would number be unreasonable to bear in mind the fact that he is an officer employed by the appellant, and as such he is likely to be interested in supporting the claim for rehabilitation which the appellant has decided to make. According to Mr. Tongaonkar, the average future life of the plant and machinery existing in 1939 would be approximately seven years from 1-8-1954. Similarly, the approximate future life of the three other categories of blocks would be 13, 15 and 20 years respectively. He has stated that in calculating the life of machinery, it is necessary to take into companysideration, first the mechanical companydition of the machinery, second whether it is efficient or has been rendered obsolete because new machinery of modern design with a companysiderably better efficiency has companye into the market. In other words, the probable useful life of the machinery may be prematurely determined by the emergence of more efficient machinery. In support of this statement he has given some instances where the appellants plant or machinery had to be changed mainly for the reason that a new companyresponding plant or machinery was more efficient and gave more satisfactory results. However, stated generally,in the opinion of the witness, the average life of a cement plant taken as a whole would be 25 years if it is properly main- tained. Mr. Tongaonkar then gave evidence about the rise in prices of plant and machinery and he produced Ex. C-36 which is a statement showing the progressive increase in prices from pre-war days up to 1955-56 of major items of machinery, gear boxes, motors and power plant used in cement factories. He has stated that the said statement had been prepared on the basis of actual quotations which he had in his possession. His evidence shows that between 1951-54 there has been a rise of 11, whereas between 1954-56 there has been a rise of 7 in the prices of the relevant items of machinery. He then sought to companyroborate his evidence on this point by the expenditure actually incurred by the appellant while putting into companymission a new cement factory at Sindri in about 1955. The calculations made by him in this behalf show that the companyt of companystruction of a new factory is approximately 4.3 times the companyt of companystruction of similar factory in 1939. In regard to the life of buildings, Mr. Tongaonkar stated that first-class buildings lived approximately for 40 years provided they are properly maintained and provided they are number in earthquake zone but he added, that for the main unit of the cement plant it is usual to take the life of buildings at 25 years. He also stated that in many cases the existing buildings have got to be either demolished or companysiderably modified when the main machinery whose life is 25 years has to be replaced by modern machinery which is of a different design and which would require buildings and foundations of different size and type. Thus, for this special circumstance also, he was number prepared to give the buildings of the appellant an average life longer than 25 years. In regard to the increase in the companyt of companystructing buildings, he produced two statements, C-6 and C-14. Ex. C- 6 shows the increase in prices of building materials since 1938-1954, whereas Ex. C-14 shows the companytinually increasing amount of expenditure incurred by the appellant for companystruction of labour quarters, etc. It is on this evidence that Mr. Tongaonkar has adopted the respective multipliers and divisors in arriving at the figure of the amount required for rehabilitation. As we have already pointed out, for the pre-1939 block he has taken 4.28 as the multiplier, whereas for the block purchased between 1940-44 he has taken 2.8 as the multiplier. He has explained that the multiplier of 4.28 is really made up of two multipliers. Certain portion of the plant and equipment which is obtained from abroad is estimated at 60 of the total companyt and the expenditure on the remaining items is estimated at 40 of the total companyt. The multipliers of these two groups are estimated at 4.8 and 3.5 respectively, and by calculations it has been numbericed that the average ratio companyes to 4.28. This is the genesis of, and the justification for, the adoption of 4.28 as the multiplier. He has also added that the proportion of 60 and 40 which he had mentioned was based on his experience of building a number of cement factories and of carrying out extension and modernisation of existing cement factories. The multiplier was based, said the witness, on the state, of companyparative quotations of plant and machinery received in 1939 and quotations received of similar machinery recently. It would thus be clear that in devising the multiplier and divisor, Mr. Tongaonkar has drawn very largely on his experience and has drawn inferences which he thought were reasonable. Besides in making the relevant calculations he has number dealt with the plant and machinery and the buildings and other assets separately, but has lumped them together under the respective blocks. The approximate companyt of the merging companypanies of their assets as on July 31, 1936, was 5.73 crores of rupees. Ex. C-3 which is a certificate issued by the Chartered Accountants shows that according to the blocks, the original companyt of the block of fixed assets excluding goodwill and purchase of rights and land as at 31st July, 1954, of the appellant under the groups of years of acquisition, amounted to Rs. 19,41,38, 100. Similarly, Ex. C-28 which is also a certificate issued by the Chartered Accountants, shows that the original companyt of such portion of fixed assets excluding goodwill and purchase of rights and lands as have been discarded, scrapped or sold as on July 31, 1954, of the appellant companypanies under the groups of years of acquisition numbered in the certificate, amounted to Rs. 1,70,91, 296. The figures supplied by these two certificates are mentioned in companys. 2 and 3 respectively in Ex. C-2. Under the method adopted by Mr. Tongaonkar the companyt of discards is shown in the respective years when the portions of blocks were discarded and the amounts spent on rehabilitation from year to year have gone with the blocks of the said respective years shown in company. 2. The amount of rehabilitation has thus been calculated by the adoption of the multiplier and divisor selected by Mr. Tongaonkar. The question which calls for our decision is whether the multipliers and divisors adopted by Mr. Tongaonkar can be said to be appropriate. As we have already mentioned, it is the multipliers and divisors that play a decisive part in the determination of the employers claim for rehabilitation in all bonus proceedings, Mr. Tongaonkars evidence has been severely criticised by the respondents and in fact, the tribunal does number appear to have been favourably impressed by it. Before dealing with the criticism made against his evidence, it would be pertinent to observe that the witness has given exhaustive details on the points put to him in examination-in-chief, and his evidence, read as a whole, does make an imposing reading. But sometimes the wealth of details given by experts is Apt to companyplicate the narrow points of dispute between the parties and to create doubt and companyfusion the large number of technical details expressed in technical language may, in some cases, tend to cloud rather than clarify the points which the tribunal has to companysider. We feel inclined to hold that is what has happened to some extent in the present case. But that by itself cannot obviously be said to introduce any infirmity in the evidence given by the expert or affect its credibility. It only means the tribunal has to analyse his statements, examine them carefully in the light of his cross-examination and decide how far it would be justified in acting on them. It has been urged before us by the respondents that the claim made by Mr. Tongaonkar in regard to the rehabilitation of the pre-1939 block should be rejected. The companytention is that, this block must have been companypletely replaced before 1953 and numberclaim for its rehabilitation can be entertained. This argument was based substantially on the assumption that a part of Rs. 997.42 lakhs must have been utilised for the purpose of replacing the said block. Mr. Tongaonkar has stated that prior to 1-8-1954 the total amount spent on modernisation, replacement and rehabilitation and other sundry jobs, but excluding expansion, was approximately Rs. 9.97crores, and in support of this statement he produced Ex. C-29, which shows the said expenditure year by year. According to this statement 78 lakhs had been spent on the companystruction of Rohri Works and Kistna Works, and Rs. 622-13 lakhs had been spent on the expansion during the post-war period. This gives the figure of Rs. 700.13 lakhs. Deducting this amount from the total expenditure of Rs. 1697-55 lakhs, the balance of, Rs. 997.42 lakhs is shown as expenditure on modernisation, rehabilitation, replacement and other sundry capital jobs. It is in respect of this amount of Rs. 997.42 lakhs that Mr. Tongaonkar was severely cross-examined. In cross-examination he stated that he was number in a position to say whether out of the total expenditure of Rs. 997.42 lakhs shown in Ex. C-29 a major portion had been spent on rehabilitation and replacement of the pre-1939 block and 1940-44 block. He admitted that the figures in Ex. C-29 had been prepared by the Accounts Department from the Financial Books so far as year to year total expenditure was companycerned and he also stated that it was number possible for him to give details about the said expenditure. These answers indicated that the amount of Rs. 997.42 lakhs had been ascertained mechanically by deducting from the total expenditure of Rs. 1697.55 lakhs incurred on all jobs up to 31-7-1954 the estimated expenditure of Rs. 700.13 lakhs which was treated as expenditure for expansion during the said period. It is on these statements that the respondents placed reliance in support of their argument that the amount of Rs. 997.42 lakhs must have been utilised for companypletely replacing the pre- 1939 block. Thus presented, the argument numberdoubt appeared very plausible, and so we asked Mr. Kolah to give us a satisfactory explanation about the items of this expenditure. Accordingly Mr. Kolah has filed a statement, Ex. I which gives a rough classification of the total capital expenditure of about Rs. 997 lakhs incurred up to 31-7-1954 on modernisation, replacement, rehabilitation and other sundry and miscellaneous jobs. The several items of this expenditure are broadly indicated under eight heads, the last of which companyering an amount of Rs. 160 lakhs has in its turn been split up into five separate items by the statement 1 a . There was some dispute before us about the admissibility of some of the said items under cl. 5 of this document 1 a . But Mr. Kolah companytends, and it is number disputed by the respondents either, that even if the whole of the disputed item 5 is excluded, the remaining items on Ex. 1 give a fairly satisfactory explanation about the work of rehabilitation, replacement and modernisation on which the bulk of Rs. 997.42 lakhs must have been spent. In view of this statement we must hold that the assumption made by the respondents that the said amount of Rs. 997.42 lakhs must have been utilised for replacing the pre-1939 block is number well-founded. It is then companytended that there is numberjustification for keeping the pre-1939 block still alive in view of the estimate made by Mr. Tongaonkar about the life of the cement plant and machinery. The suggestion is that the oldest block is deliberately kept alive in order to enable the appellant to claim a higher multiplier in calculating the rehabilitation amount. It cannot be said that there is numberforce at all in this criticism. In fact Mr. Tongaonkar himself has admitted that a given portion of this block companyld have been discarded earlier, but he added, that a part of it had been rehabilitated as a temporary measure in order to carry on. That is why that particular portion of the block had number been discarded so far. According to him the pre-1939 block companytains a portion whose useful life is already over, but the appellant would have to carry on with it until finances companyld be found for modernisation or reconstruction or entire replacement of the said block. In our opinion, this explanation cannot be said to be wholly satisfactory. If the useful life of the whole block had really expired, the appellant would have easily found it possible to replace the said block in due time having regard to its general financial position. The next criticism made against Mr. Tongaonkars evidence is that admittedly he has number calculated the average life of the said block. He stated that he had assessed the pre-1939 block by his personal visits to the factory by observing to what extent it had been rehabilitated as a temporary measure and by companysidering what its present companydition was. It is possible that with his knowledge and experience Mr. Tongaonkar may be able to form a proper assessment about the life of the machinery in the manner deposed to by him. But unfortunately, effective cross-examination on this point has been stifled to some extent because we find that on some material points questions put to the witness were objected to by Mr. Kolah and the objection was upheld by the tribunal. The witness was asked whether he companyld tell the tribunal with his wide experience, how many years on the average 1939 block had spent prior to 1939. This question was clearly relevant and from the respondents point of view it was important. If the witness was able to predicate about the future useful life of the machinery from his examination of the plant, it was suggested to him that it should be possible for him to give an estimate about the life already spent by it by the same process. The object of this question obviously was to show that the machinery in question had lived much longer than its estimated life as deposed to by the witness. This question having been disallowed, any further cross- examination to test the claim of the witness that from the inspection and examination of the machinery he can predicate the period of its future useful life became impossible. The witness was further asked to state whether it would be companyrect to assume that the said pre-1939 block had on an average spent more than 15 years of its life. This question also was disallowed, and the respondents naturally make a serious grievance that they were number given an opportunity to show that Mr. Tongaonkars estimate about the life of the plant and machinery was a gross under statement. The respondents have then objected to the inclusion of several items in the approximate companyt of rehabilitation mentioned in company. 8 of Ex. C-2. The new additional packing machine in regard to the factory at Banmore as well as the crane storage are, it is urged, number items of rehabilitation, but of expansion. Similar criticism is made in regard to the dust-collector plants, companyl-handling plants, items in regard to the fluidification system, diesel engine shunting locomotive and similar other items. The respondents grievance is that by including these items which are really matters of expansion, the amount of approximate companyt of rehabilitation has been unduly increased. We are unable to say if the grievance is justified. In regard to the multiplier adopted by Mr. Tongaonkar, the criticism is that it is based on hypothetical companysiderations determined by him in a subjective manner. It is also pointed out that the failure of the witness to take out the present day replacement companyt of individual items of the pre- 1939 block has introduced an additional element of uncertainty in the final calculations made by him in regard to the multiplier. No doubt, the witness has stated that he has used the multiplier of 4.8 on a companyparative study of the quotations received between 1939 and the present day, but dealing with the machinery blockwise is number a very satisfactory way of determining such a multiplier. In support of this argument, reference is made to the statements made by the witness to the companyt of 180-ton per- day kiln, if manufactured by the appellant, would be lower than that of a 300-ton-a-day kiln. The witness then added that the appellant does number manufacture a 180-ton-a-day kiln, and if such a kiln is imported from abroad its companyt would be somewhat higher than that of a 300-ton-a-day kiln manufactured by the appellant under present day companyditions. He was then asked whether he had got a quotation of a 180- ton-a-day kiln, and he admitted that he had numbere, and that he had estimated it approximately at Rs. 11 1/2 lakhs. The respondents urged that this estimate about the companyt of an imported 180-ton-a-day kiln is purely numberional and is number based on any material at all. This part of the criticism is justified. The next argument urged against the statements prepared by Mr. Tongaonkar is that he appears to have taken into account the prices prevailing in 1956 and has companypletely ignored the prices as they obtained in the previous years. We have already observed that in deciding the amount of rehabilitation by the adoption of an appropriate multiplier, the tribunal should take into account all relevant facts and these would number be companyfined to the price level prevailing in any one particular year. When deciding the hypothetical question as to what would be the price in future when the plant and machinery would have to be replaced or rehabilitated, the tribunal has to take an overall picture of prices into account, and the argument is that companycentration on the price level of 1956 alone has introduced an infirmity in the calculations made by the witness. There is another infirmity in these calculations which has been criticised by the respondents. Mr. Tongaonkar has lumped together the plant and machinery as well as buildings and other properties belonging to the appellant in company. 2 of Ex. C-2. The more scientific and satisfactory method of dealing with the question of rehabilitation is to treat the plant and machinery separately from the buildings and other assets that need rehabilitation. In fact we asked Mr. Kolah to give us a statement showing the companyt of the plant and machinery and the buildings and other assets separately in order to enable us to have a clearer picture about the extent of the rehabilitation needs of the appellant. He has accordingly filed a statement, Ex. F a . There is yet another point on which Mr. Tongaonkars evidence has been criticised by the respondents. It is argued that this evidence shows that under his companycept of modernisation several items of expansion can be included. Mr. Tongaonkar has stated that by modernisation he meant a companyposite scheme companyprising replacement of the part of the old machinery by new machinery, installation of additional machinery because the layout of the companyposite modernisation scheme is different from the previous layout and rehabilitation of the remaining machinery as a short term measure. By rehabilitation he ment alterations to a machine or machinery, installation for improving its mechanical performance, its technical efficiency or to extend its life by a further span. This would also include what he companypendiously describes as the removal of weak links. According to him expansion can be divided into two groups, viz., Group No.-1 companystruction of the companypletely new factory solely for obtaining additional production and Group No. 2 would companyer the specific additional machines which are installed number for modernisation purposes as such, but with the primary object of obtaining additional production. He companycedes that in the modernisation of an existing factory expansion is only a part of the scheme. This means that in the modernisation scheme there would be an element of expansion. It would thus be clear that the very broad and wide description of modernisation given by the witness would justifiably give rise to an apprehension in the minds of workmen that under the heading of modern- isation items of expansion pure and simple are likely to creep in. That is why evidence given by experts in such proceedings needs to be scrutinised carefully, with a view to exclude items of expansion properly so called from the relevant calculations. Mr. Tongaonkar has stated that when plant or machinery is rehabilitated or replaced it may lead to increase in production. But such an in Crease is purely incidental. But what would be the position where, for instance, a 180- ton-a-day kiln is substituted by a 300-ton-a-day kiln by way of rehabilitation or replacement ? The employer is entitled to say that the first category of kilns is number available in the market or that the later category of kilns is more profitable Ind economically more useful. That being so, if the first kiln is discarded and is substituted by the latter, that is an item of rehabilitation or replacement and number of expansion. On the other hand, by the substitution of the latter kiln there would be such an appreciable increase in production that the workmen may be entitled to companytend that some apportionment should be made and the rehabilitation part of the machinery should be separated from the expansion part which has crept into the transaction. We companyfess that it would be- very difficult to undertake the task of making any such apportionment. Even so, tribunals may have to companysider the workmens plea if they are satisfied that the steps taken by the employer by way of rehabilitation have led to a very large increase in production. In this companynection the respondents have relied on Ex. H. 0. C-2 which, according to them, shows companysiderable increase in production, and that, it is urged, is the result of expansion and number of rehabilitation. Mr. Tongaonkar has suggested in his evidence that it is the intention of the employer that decides the character of the transaction. If the employer wants to instal new machinery solely with the object of expanding his business, that is expansion but if he purchases new machinery for business reasons and number for the purposes of expansion, it would be rehabilitation numberwithstanding the fact that the new machinery gives rise to increased production. This approach, in our opinion, gives undue importance to the intention of the employer and we think that, on a proper occasion, the question may have to be companysidered by the application of some objective tests. In this companynection it would be relevant to bear in mind the fact that the steps taken by the appellant for rehabilitating, replacing or modernising its machinery are a part of its plan of expanding its business so as to meet the growing demand for cement in our companyntry. In deciding the question as to whether the claim as disclosed by the statements prepared by Mr. Tongaonkar is inflated or number, the respondents have asked us to companysider the estimate made by the appellants Chairman in that behalf. In his speech delivered on January 24, 1951, at the Fourteenth Annual General Meeting of the appellant companypany, the Chairman stated that most of the companypanys pre-war plant would be due for replacement in the companyrse of the next ten years and he added that at the present price levels, replacement will companyt on an average 2 1/2 times the original companyt. This will involve an expenditure of about Rs. 8 crores over and above the provision already made for depreciation . The companytention is that, companysidered in the light of this estimate, the pre,sent claim for rehabilitation is very much inflated. When Mr. Tongaonkar was asked about this estimate he stated that the Chairman had number companysulted him while drafting the annual report or while drafting the portion of the speech in regard to rehabilitation and he also added that he did number agree with the figures given by the Chairman regarding the replacement companyt of plant and machinery in his report dated January 24, 1951. This explanation may number be very satisfactory. But we cannot ignore the fact that when the Chairman made his statement he did number purport to calculate the claim for rehabilitation in terms of the formula and so it would number be fair to test the evidence of the witness in the light of the estimate given by the Chairman in his speech. We have so far companysidered the broad arguments urged against Mr. Tongaonkars evidence. Unfortunately, the tribunal has companytented itself merely with the observation that the multiplier of 2.7 would be adequate and it has given numberfinding as to the suitable divisor. That is why we must number proceed to adopt a suitable multiplier and divisor for deciding the question of rehabilitation. We have already stated our companyclusions in regard to some of the infirmities in the evidence of Mr. Tongaonkar and the statements prepared by him. He has lumped together all assets of the appellant that need rehabilitation. He has taken into account the prices prevailing only in 1956, and in the selection of an average multiplier he has probably been slightly generous to the appellant. His estimate about the life of the plant and machinery has number been allowed to be sufficiently tested in crossexamination and, on the whole, it appears to err a little too much on the side of a companyservative estimate and if that is so his divisor may need revision it is also probable that in the items included by him under rehabilitation may have been included some which are more of the character of expansion than rehabilitation, replacement or modernisation. Besides, it is number unlikely that the steps taken by the appellant ostensibly for rehabilitation, replacement and modernisation of the machinery have appreciably increased its production, and that may partly be due to the fact that the general plan of expansion adopted by the appellant has been in operation for some time past. It is in the light of these facts that we have to examine the appellants claim for rehabilitation. In doing so, we have taken Ex. C-2, Ex. C-23 and Ex. F a as a basis for our calculations. It is somewhat unfortunate that in making its claim for rehabilitation Mr. Tongaonkar did number make calculations separately in respect of plant and machinery as distinct from buildings, roads, bridges and railway sidings. It is true that at our instance a statement Ex. F a has been filed before us but if such a statement had been filed before the tribunal, the respondents would have had a better opportunity of testing the accuracy of the calculations made in it and the basis on which the respective multipliers and divisors are sought to be deduced from it. We would, therefore, like to make it clear that the calculations which we number propose to make in regard to the item of rehabilitation should number be ,taken to be binding on the parties in subsequent years. If, in the light of our decision on the principal points raised before us in the present appeals, the parties decide to settle their disputes about bonus for subsequent years there would be numberoccasion for the tribunal to deal with them on the merits. If, however, these disputes have to be, settled by the tribunal, it would be open to the parties to lead evidence in support of their respective companytentions. The tribunal also would be at liberty to companysider the matter afresh and companye to its own companyclusion on the merits. Let us number proceed to make the relevant calculations. The first step to take is to companyrect the figures in Ex. C-2 by excluding the companyt of buildings, roads, ,bridges and railway-sidings from the total companyt mentioned in it against the several blocks. This companyt has been supplied to us by the appellant in Ex. F a . This is how the companyrections work out. In our calculations all figures are expressed in lakhs Chart I. Period Original companyt Less companyt of Balance of block buildings etc. 1 2 3 4 Up to 1939 486.89 132.98 353.91 1940-44 59.91 22.38 37.53 1945-47 208.93 68.15 140.78 1948-54 1144.81 333.47 811.34 In Ex. F a the appellant has shown the respective average ratios in company. 5 in regard to items of property mentioned in company. 2. We think, in making our calculations, it would on the whole be fair to adopt 3.5 as a suitable multiplier up to 1939, 2 from 1940.47 and 1 from 1948-54 as in C-2 for replacement by part A.C.C. machinery. We have number disturbed the divisors taken by C-2 though we feel inclined to hold that Mr. Tongaonkar has underestimated the probable life of machinery. The amount of yearly requirement for rehabilitation for the total block minus buildings, etc., would then work out at Rs. 229.39. This does number take into account the available reserves that aspect is companysidered later on Chart II. Period Original companyt of Multiplier Total Less Balance Life Yearly break- of require- down as machi- ment in Ex. C-2 nery in Yrs. 1 2 3 4 5 6 7 8 approx. UP to 1939 353.91 x3.5 1238.68 65.921172.767 167.54 1940-44 37.53 x2 75.06 4.66 70.40135.41 1945-47 140.78 x2 281.56 11.19 270.371518.02 1948-54 811.34 x1 811.34 42.84 768.502038.42 Total 229.39 Then we would deal with the buildings, roads, bridges and railway-sidings., These may be given an average life of 30 years for all blocks in order to companypensate for cases where they have to be demolished on account of modernisation. According to the previous statements of the appellant the life of factory buildings was about 35 years and residential areas 50 years. Even so we propose to take the average life of 30 years in making our calculations in respect of these blocks. The multipliers may be taken as 2.25 for pre-1939 blocks, 1.5 for 1940-47 blocks, 1 for 1948-54 blocks. The Bombay block has been taken as in Ex. C-2 Chart III. Period Cost Multi- Total Less Balancelife Yearly plier break down require- valued at 5 ment of companyt 1 2 3 4 5 6 7 8 UP to 1939 132.98 X 2.25 299.20 6.65 292.55 20 144.63 1940-44 22.38 x 1.5 33.57 1.12 32.45 25 1.29 1945-47 68.15 x 1.5 102.22 3.40 98.82 25 3.95 1948-54 333.47 x 1 333.47 16.67 316.80 30 10.56 Bombay office 40.83 50.28 .73 49.55 69 .71 block Total 31.14 Thus the total yearly requirement for rehabilitation of this block would companye to 31.14 lakhs. The appellants claim for rehabilitation can number be calculated on the basis of Ex. C-23 as companyrected in the light of the three charts prepared by us. As, the calculations in the chart show, we would hold that the appellant is entitled to an allowance of 216.10 lakhs for rehabilitation in the relevant year Chart IV. Replacement of pre-1939 block Cost of machinery Chart II 1172.76 Deduct reserves 311.00 Balance 861.76 divided by 7 123.11 Add for buildings Chart III 14.63 Total 137.74 Replacement companyt of 1940-44 block Including buildings etc. 5.41 plus 1.29 6.70 do for 1945-47 18.02 plus 3.95 21.97 do for 1948-54 38.42 plus 10.56 48.98 do for Bombay Office .71 total 216.10 Having decided that the total claim for rehabilitation admissible to the appellant is 216.10 lakhs for the relevant year, we must number proceed to determine whether on the working of the formula any surplus profit is available. We have made the following calculations in the light of the principles laid down by us in this judgment Chart V. Total profit excluding Bhupendra factory 428.71 Less numberional numbermal depreciation p. 428, Pt. 1 100.22 Less income-tax payable 7 as. in the Rupee as per Note A below 115.16 Less 6 on paid-up capital 76.06 Less 4 on working capital 26.10 Total317.54 317.54 Balance 111.17 Less provision for rehabilitation 115.88 Balance4.71 This is how we have calculated theincome-tax payable for the relevant year Note A. Gross profits 428.71 Less statutory depreciation 165.49 ------------------ Balance 263.22 Income-tax 7 as. in the Rupee 115.16 Provision for rehabilitation vide Chart V Total from Chart IV. 216.10 Less numberional numbermal depreciation 100.22 ---------------- Balance 115.88 ----------------- We ought to add that in our calculations we have number taken into account the Bhupendra Factory because the relevant material for working out the figures in regard to this factory is number adequate or satisfactory. However from such material as is available it appears that if the profits made by the said factory are included in the calculations and rehabilitation required by it is worked out, it would number materially affect the figure of rehabilitation amount determined by us. The result is that there is numberavailable surplus from which the respondents can claim any bonus for the relevant year. It is true that the appellant has already paid the respondents 20.65 lakhs as bonus for the relevant year, and it is likely that it may companytinue to do so in future but that is a matter which is number governed by the formula. In view of the fact that the working of the formula leaves numberavailable surplus the appeal must be allowed and the award made by the tribunal set aside.

Case appeal was accepted by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 177 of 1957. Appeal by special leave from the judgment and order dated April 11, 1957, of the Punjab High Court in Criminal Appeal No. 7-D of 1955, arising out of the judgment and order dated January 19, 1955, of the Court of Special Judge, at Delhi in Corruption Cas No. 2 of 1953. S. Pathak, R. Ganapathy Iyer and G. Gopalakrishnan, for the appellant. K. Daphtary, Solicitor-General of India, G.C. Mathur and R. H. Dhebar, for the respondents. 1959. May 21. The Judgment of the Court was delivered by SINHA J.-This appeal by special leave is directed against the judgment and order of the High Court on Judicature for the State of Punjab at Chandigarh dated April 11, 1957, affirming those of the Special Judge, Delhi, dated January 19, 1955, companyvicting the appellant under s. 5 2 of the Prevention of Corruption Act 2 of 1947 . The sentence passed upon the appellant was six months rigorous imprisonment. The facts leading upto this appeal, may shortly be stated as follows During and after the Second World War, with a view to augmenting the food resources of the companyntry, the Government of India instituted a Grow More Food Division in the Ministry of Agriculture. S. Y. Krishnaswamy, a Joint Secretary in that Ministry, was placed in charge of that Division, with effect from January 2, 1947. The appellant was working in that Department as Director of Fertilizers. He was a former employee of the well-known producers of fertilizers, etc., called Imperial Chemical Industries . Fertilizers were in short supply and, therefore large quantities of such fertilizers had to be imported from abroad. As chemical fertilizers were in short supply number only in India but elsewhere also, an international body known as the International Emergency Food Council E.F.C. had been set up in United States of America, and India was a member of the same. That body used to companysider the requirements of different companyntries in respect of fertilizers, and used to make allotments. Russia was number a member of that Organisation. Towards the end of 1946, a Bombay firm, called Messrs. Nanavati and Company, which used to deal in fertilizers and had bussiness companytcts with Russia, offered to supply ammonium sulphate,from Russia to the Government of India. In the years 1947 and 1948, companysiderable quantities of ammonium sulphate were obtained through Messrs. Nanavati and Company aforesaid. One D. N. Patel, who was a former employee of Messrs. Nanavati and Company, joined a partnership business under the style of Messrs. Agri Orient Industries Limited of Bombay. This firm obtained a companytract from the Government for the supply of twenty thousand tons of ammonium sulphate from United States of America, in February, 1950. In the companyrse of this business deal, the said patel experienced some difficulty in obtaining Government orders regarding some companysignments. The appelant was approached in that companynection and it is aleged that Patel paid to the appellant Rs. 10,000 at Bombay as bribe for facilitating matters. But in spite of the alleged payment, difficulties and delays occurred and the companysignments, even after they had reached heir destination in India, were number moving fast enough, thus, causing companysiderable loss to the firm in which Patel was interested. Patel, therefore approached Shri K. M. Munshi who was then the Minister For Food and Agriculture in Delhi, and disclosed to him the alleged payment of bribe of Rs. 10,000, as also the fact that the appellant had been receiving arge sums of money by way of bribes for showing favours in the discharge of his duties in the Department. The Minister aforesaid directed thorough enquiries to be made, and the matter was placed in the hands of the Inspector-General of Special Police Establishment. A departmental companymittee was also set up of three senior officers of the Department to hold a departmental inquiry, and ultimately, as a result of that inquiry, the Minister passed orders of dismissal of the appellant, in August, 1950. A further inquiry in the nature of a quasi-judicial inquiry, was held by the late Mr. Justice Rajadhyaksha of the Bombay High Court, in 1951. The inquiry related to matters companycerned with the import of fertilizers into India. After receipt of the report of the inquiry by the late Mr. Justice Rajadhyaksha, in January, 1952, and after companysideration of the matters disclosed in that report, a first information report was lodged on April 4, 1952, and thorough investigations were made into the companyplaints. The result was that two cases were instituted. The first one related to an- alleged companyspiracy involving the appellant, Krishnaswamy and one of the proprietors of Messrs. Nanavati and Company, and several others, relating to bribery and companyruption in companynection with the supplies of ammonium sulphate from Russia. With that case, we are number companycerned here. -The second case, out of which the present appeal arose, was instituted against two persons, namely the appellant and Krishnaswamy, that they had entered into a companyspiracy to receive bribes and presents from various firms, in companynection with the import of fertilizers. The learned Special Judge, who heard the prosecution evidence, came to the companyclusion that it did number disclose any companyspiracy as alleged, except in certain instances which formed the subject-matter of the charge of companyspiracy which was being tried separately, as aforesaid. The present case, therefore, proceeded against the appellant alone under two heads of charge, namely, 1 that he had been habitually accepting or obtaining, for himself or for others, illegal gratifications from a number of named firms and others, in companynection with the import and distribution of fertilizers- s. 5 1 a of the Prevention of Curruption Act, 1947 hereinafter referred to as the Act , and 2 that he had been habitually receiving presents of various kinds by abusing his position as a public servants. 6 1 d of the Act. The High Court, in agreement with the learned Special Judge, found the evidence of P. Ws. 9 and 10, who were the principal prosecution witnesses as regards the passing of certain sums of money from certain named firms to the appellant, as wholly unreliable. Further more, Patel, being in the position of an accomplice, his evidence did number find sufficient companyroboration from other facts and circumstances proved in the case. The High Court, number being is a position to accept the tainted evidence aforesaid, found that the case of payment of particular sums of money by way of bribes, had number been established. But relying upon the presumption under sub-s. 3 of s. 8 of the Act, the High Court came to the companyclusion that the appellant had number satisfactorily accounted for the receipt of Rs. 73,000 odd in cash and about Rs. 18,000 by cheques, during the years 1947 and 1948, which sums were wholly disproportionate to the appellants known source of income, namely, his salary as a Government servant, and that, therefore, he was guilty of criminal mis- companyduct in the discharge of his official duties. In that view of the matter, the High Court companyfirmed the companyviction and sentence of six months rigorous imprisonment, passed by learned Special Judge of Delhi. The learned companynsel for the appellant has companytended 1 that on the admitted facts, the ingredients of s. 5 3 of the Act, had number been established, 2 that when the charge in respect of specific instances of companyruption, has number been proved, as found by the companyrts below, it should have been held that the companytrary of the presumption companytemplated by s. 5 3 , namely, of the guilt of criminal misconduct, had been established, and 3 that the appellants statement under s. 342 of the Code of Criminal Procedure, as also his statements companytained in his written statement, had number been proved to be false, and that, therefore, it should have been held that the case against the appellant had number been proved beyond all reasonable doubt. It is true that s. 5 3 of the Act, does number create a new offence but only lays down a rule of evidence, enabling the companyrt to raise a presumption of guilt in certain circumstances a rule which is a companyplete departure from the established principles of criminal jurisprudence that the burden always lies on the prosecution to prove all the ingredients of the offence charged, and that the burden never shifts on to the accused to disprove the charge framed against him. With reference to the provisions of s. 5 3 of the Act, it has been companytended, in the first instance, that the charge of criminal misconduct in the discharge of his official duties, is number companyfined to the fact as disclosed in his bank accounts with the Imperial Bank of India New Delhi Branch and the Chartered Bank of India, Australia and China Chandni Chowk Branch , that his nett credit with those banks totalled upto a figure just over Rs. 91,000. He accounted for that large balance by stating that he was the only son of his father who had been able to give him advanced education in England for a period of over seven years that after his return to India, he had been holding highly paid posts for about 20 years in the Imperial Chemical Industries, in the Army and in the Government of India that he had numberchildren and numberother dependants except his wife that with his limited household expenses, he was able to save a good round sum out of his salary and allowances which were companysiderable, because his duty took him throughout the length and breadth of the companyntry, thus enabling him to earn large sums of money by way of travelling allowances which he saved by staying with his friends and relations during his official tours. He added that he had received a gratuity for services rendered to the Army, and also companysiderable sums of money as his provident fund from the Imperial Chemical Industries, towards the end of November, 1947. He also stated that his deposits in the two banks aforesaid, represented sums of money saved in cash out of his salaries, allowances and gifts from his parents, as also re-payments of loans advanced by him to his friends while he was in the Army, and later. He added that some of the deposits in cash were really re-deposits of earlier withdrawals from the banks, as also the sale-proceeds of his old car sold in June, 1948, for Rs. 5,500, together with the sale-proceeds of gold jewelry belonging to his wife. He also tried to explain the large deposits of cash in 1948, by alleging that he had borrowed a sum of rupees 20,000 from one Ganpat Ram on a pronote which he, later on, re-paid and obtained a receipt , with a view to building a house of his own in Delhi, but as that negotiation fell through, he deposited that cash amount in his account in the two banks aforesaid in August, 1948, as the creditor aforesaid would number accept re-payment of the loan within a period of two years, unless the interest for that period was also paid at the same time. With reference to those statements of the accused from the dock, it was companytended by the learned companynsel for the accused that in view of those facts, it companyld number be said that the accused had number accounted for those large deposits with the two banks aforesaid. The High Court has pointed out that the matters alleged in the , statement aforesaid of the accused, were capable of being easily proved by evidence which had number been adduced that allegation was numberproof, and that his lucrative posts in the Imperial Chemical Industries and in the Army, were matters of history in relation to the period for which the charge had been framed. The High Court, therefore, found it impossible to accept the appellants bare statement from the dock as to how amounts earned far in the past, companyld find their way into the banks during the years 1947 and 1948. It has been repeatedly observed by this Court that this Court is number a Court of criminal appeal, and we would number, therefore, examine the reasons of the High Court for companying to certain companyclusions of fact. Apparently, the High Court companysidered all the relevant statements made by the accused under s. 342 of the Code of Criminal Procedure and in his written statement, and came to the companyclusion that those statements had number been substantiated. We cannot go behind those findings of fact. Reference was also made to cases in which companyrts had held that if plausible explanation had been offered by an accused person for being in possession of property which was the subject-matter of the charge, the companyrt companyld exonerate the accused from criminal responsibility for possessing incriminating property. In our opinion, those cases have numberbearing upon the charge against the appellant in this case, because the section requires the accused person to satisfactorily account. for the possession of pecuniary resources or property disproportionate to his known sources of income. Ordinarily, an accused person is entitled to acquittal if he can account for honest possession of property which has been proved to have been recently stolen see illustration a to s. 114 of the Indian Evidence Act, 1872 . The rule of law is that if there is a prima facie explanation of the accused that he came by the stolen goods in an honest way, the inference of guilty knowledge is displaced. This is based upon the well- established principle that if there is a doubt in the mind of the companyrt as to a necessary ingredient of an offence, the benefit of that doubt must go to the accused. But the Legislature has advisedly used the expression satisfactorily account. , The emphasis must be on the word satisfactorily , and the Legislature has, thus, deliberately cast a burden on the accused number only to offer a plausible explanation as to how he came by his large wealth, but also to satisfy the companyrt that his explanation was worthy of acceptance. Another argument bearing on the same aspect of the case, is that the prosecution has number led evidence to show as to what are the known sources of the appellants income. In this companynection, our attention was invited to the evidence of the Investigating Officers, and with reference to that evidence, it was companytended that those officers have number said, in terms, as to what were the known sources of income of the accused, or that the salary was the only source of his income. Now, the expression known sources of income must have reference to sources known to the prosecution on a thorough investigation of the case. It was number, and it companyld number be, companytended that known sources of income means sources known to the accused. The prosecution cannot, in the very nature of things, be expected to know the affairs of an accused person. Those will be matters specially within the knowledge of the accused, within the meaning of s. 106 of the Evidence Act. The prosecution can only lead evidence, as it has done in the instant case, to show that the accused was known to earn his living by service under the Government during the material period. The prosecution would number be justified in companycluding that travelling allowance was also a source of income when such allowance is ordinarily meant to companypensate an officer companycerned for his out-of-pocket expenses incidental to journeys performed by him for his official tours. That companyld number possibly be alleged to be a very substantial source of income. The source of income of a particular individual will depend upon his position in life with particular reference to his occupation or avocation in life. In the case of a, Government servant, the prosecution would, naturally, infer that his known source of income would be the salary earned by -him during his active service. His pension or his provident fund would companye into calculation only after his retirement, unless he had a justification for borrowing from his provident fund. We are number, therefore, impressed by the argument that the prosecution has failed to lead proper evidence as to the appellants known sources of income. It may be that the accused may have made statements to the Investigating Officers as to his alleged sources of income, but the same, strictly, would number be evidence in the case, and if the prosecution has failed to disclose all the sources of income of an accused person, it is always open to him to prove those other sources of income which have number been taken into account or brought into evidence by the prosecution. In the present case, the prosecution has adduced the best evidence as to the pecuniary resources of the accused person, namely, his bank accounts. They show that during the years 1947 and 1948, he had credit at the banks, amounting to a little over Rs. 91,000. His average salary per mensem, during the relevant period, would be a little over Rs. 1,100. His salary, during the period of the two years, assuming that the whole amount was put into the banks, would be less than one-third of the total amount aforesaid, to his credit. It cannot, therefore, be said that he was number in possession of pecuniary resources disproportionate to his known sources of income. It was next companytended that the burden cast on the accused by sub s. 3 of s. 5 of the Act, was number such a heavy burden as lies on the prosecution positively to prove all the ingredients of an offence. In that companynection, reference was made to a number of decisions, particularly Rex v. Carrbriant 1 , to the effect 1 1943 1 K. B. 607, referred to under Art. 3907 at p. 1511 in Archbold Criminal Pleading Evidence and Practice, 34th Edn. that the onus of proof lies on the accused person to show that a certain proved payment was in fact number a companyrupt payment, but that the burden is -less heavy than that which, ordinarily, lies on the prosecution to prove its case beyond all reasonable doubt. Reference was also made to Otto George Gfeller v. The King 1 , Hate Sing Bhagat Singh v. State of Madhya Bharat 2 and Regina v. Dunbar 3 . In our opinion, those decisions do number assist the appellant in the present case. In this case, numberacceptable evidence, beyond the bare statements of the accused, has been adduced to show that the companytrary of what has been proved by the prosecution, has been established, because the requirement of the section is that the accused person shall be presumed to be guilty of criminal misconduct in the discharge of his official duties unless the companytrary is proved. The words of the statute are peremptory, and the burden must lie all the time on the accused to prove the companytrary. After the companyditions laid down in the earlier part of sub-s. 3 of s. 5 of the Act, have been fulfilled by evidence to the satisfaction of the companyrt, as discussed above, the companyrt has got to raise the presumption that the accused person is guilty of criminal misconduct in the discharge of his official duties, and this presumption companytinues to hold the field unless the companytrary is proved, that is to say, unless the companyrt is satisfied that the statutory presumption has been rebutted by companyent evidence. Not only that, the section goes further and lays down in forceful words that his companyviction therefore shall number be invalid by reason only that it is based solely on such presumption. Lastly, it was argued that when the section speaks of the burden being on the accused person to prove the companytrary, it must mean adducing evidence to disprove the charge. The argument proceeds that as in the present case, the facts and circumstances mentioned in the charge had number been proved, the accused person must be acquitted as having disproved the charge with reference to the particular cases of bribery which had been held number proved. In our opinion, there is a A.I.R. 1943 P.C. 211. 2 A.I R. 1953 S.C. 468. 3 1958 1 Q.B. 1 fallacy in this argument. The finding of the High Court and the companyrt below, is that the prosecution had failed to adduce sufficient evidence to prove those particular facts and circumstances of criminal misconduct within the meaning of s. 5 1 a of the Act, but the failure to bring the charge home to the accused under s. 5 1 a , does number necessarily lead to the legal effect companytended for. As soon as the requirements of sub-section 3 of s. 5 have been fulfilled,the Court will number only be justified in making, but is called upon to make, the presumption that the accused person is guilty of criminal misconduct within the meaning of s. 5 1 d . In order to succeed in respect of the charge under s. 5 1 a , the prosecution has to prove that the accused person had accepted or obtained or agreed to accept or attempted to obtain from any person any gratification by way of bribe within the meaning of s. 161 of the Indian Penal Code. That charge failed because the evidence of P.W. 9 was number accepted by the High Court or the trial companyrt. The charge under s. 5 1 d does number require any such proof. If there is evidence forthcoming to satisfy the requirements of the earlier part of sub-s. 3 of s. 5, companyviction for criminal misconduct can be had -on the basis of the presumption which is a legal presumption to be drawn from the proof of facts in the earlier part of the sub-s. 3 aforesaid. That is what has been found by the companyrts below against the accused person. Hence, the failure of the charge under cl. a of sub-s. 1 of s. 5, does number necessarily mean the failure of the charge under s. 5 1 d . In our opinion, the judgment of the High Court is companyrect, and the appeal is, accordingly, dismissed.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 310 of 1954. Appeal by special leave from the judgment and order dated March 22, 1956, of the Labour Appellate Tribunal of India, Calcutta in Appeal No. Cal. 183 of 1955. C. Chatterjee, S. N. Mukherjee and B. N. Ghosh for the appellant. Sukumr Ghosh, for the respondent. 1959. May 21. The Judgment of the Court was delivered by WANCHOO J.-This appeal by special leave against the decision of the Labour Appellate Tribunal of India is limited to the question whether an order of reinstatement can be made on an application under s. 33-A of the Industrial Disputes Act, 1947 hereinafter called the Act . The brief facts necessary for the decision of this question are these. The appellant is a Jute Mill. There was a dispute pending before an Industrial Tribunal between a number of jute mills in West Bengal and their employees, and the appellant was a party to that dispute. During the pendency of that dispute, the appellant laid-off the respondent who was an employee in the ration shop maintained by the appellant from July 19, 1954, as rationing of food- stuff came to an end from July 10, 1954. The reason for the lay-off was that the ration shop was closed following the end of rationing. This resulted in the staff in that shop becoming surplus. Consequently, nine persons were selected for retrenchment on the principle of last companye first go, and the respondent was one of them. The appellant also applied under s. 33 of the Act to the Industrial Tribunal for permission to retrench the respondent along with others. Shortly before the application under s. 33, the respondent had applied under s. 33-A of the Act and. his case was that there was numberreason to make Any retrenchment on account of the closure of the ration shop and that he was at any rate longer in service than others who had been retained and therefore the principle of last companye first go had number been followed. It was also said that the respondent had been laid-off as he was an active worker of the union and as such was number in the good books of the appellant. It was, therefore, prayed that the respondent should be allowed full wages and amenities since the so-called lay-off, which was numberhing more number less than retrenchment and that he should be reinstated. The Industrial Tribunal came to the companyclusion that the lay-off was justified because of the closure of the ration shop and gave permission to the appellant to retrench the respondent on the principle of last companye first go . The respondent appealed to the Labour Appellate Tribunal. He did number urge there that there was numbernecessity for retrenchment at all. What was urged there was that the Industrial Tribunal was wrong in holding that the principle of last companye first go had been followed in this case. The Appellate Tribunal came to the companyclusion that the respondent had been in service much longer than others who had been retained and therefore the principle of last companye first go had been violated. In companysequence, the appeal was allowed and the permission to retrench the respondent was refused. The Appellate Tribunal also ordered that the respondent, should be reinstated in service without any break in the companytinuity of service and the order of the appellant in laying him off and discharging him in effect from July 19, 1954 was set aside. Thereupon the appellant came to this Court and was granted special leave on the limited question set out above. In our opinion, the answer to the limited question on which the special leave has been granted can only be one in view of the language of s. 33-A. That section lays down that where an employer companytravenes the provision is of s. 33 during the pendency of proceedings before a tribunal, any employee aggrieved by such companytravention, may make a companyplaint in writing to the tribunal and on receipt of such companyplaint the tribunal shall adjudicate upon the companyplaint as if it were a dispute referred to or pending before it, in accordance with the provisions of the Act and shall submit its award to the appropriate government and the provisions of this Act shall apply accordingly. It is thus clear that a companyplaint under s. 33-A of the Act is as good as a reference under s. 10 of the Act and the tribunal has all the powers to deal with it as it would have in dealing with a reference under s. 10. It follows, therefore, that the tribunal has the power to make such order as to relief as may be appropriate in the case and as it can make if a dispute is referred to it relating -to the dismissal or discharge of a workman. In such a dispute it is open to the tribunal in proper cases to order reinstatement. Therefore a companyplaint under s. 33-A being in the nature of a dispute referred to a tribunal under s. 10 of the Act, it is certainly within its power to order reinstatement on such companyplaint, if the companyplaint is that the employee has been dismissed or discharged in breach of s. 33. Learned companynsel for the appellant wanted to argue that this was number a case of discharge or dismissal but of lay-off. We did number permit him to raise this argument because the special leave was limited only to the question set out above. The answer to that question has already been indicated above and on that answer the appeal must fail.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No.169 of 1958. Appeal by special leave from the decision dated June 29, 1955, of the Labour Appellate Tribunal of India, Bombay, in Appeal Bombay No. 245 of 1955, arising out of the Award dated July 14, 1955, of the Industrial Tribunal, Bombay, in Reference I.T. No. 100 of 1954. K. Daphtary, Solicitor-General of India, Purshottam Tricumdas and I. N. Shroff, for the appellant. V. Phadke and K. R. Chaudhuri, for the respondents. 1959. October 16. The Judgment of the Court was delivered by GAJENDRAGADKAR J.-Are workmen entitled to the double benefit of a gratuity scheme as well as retrenchment companypensation? That is the main question which falls to be companysidered in the present appeal. The same question along with some other subsidiary points arises in some other appeals and so all of them have been grouped together and placed before us for disposal. We propose to deal with the main point in the present appeal and discuss the other points arising in the other appeals separately. This appeal by special leave arises from an industrial dispute between the Indian Hume Pipe Co. Ltd., Bombay hereinafter called the appellant and its workmen monthly- rated including canteen boys employed under it hereinafter called the respondents . The dispute was in regard to the claim for gratuity made by the respondents and it was referred to the tribunal in these words Gratuity- employees should be paid gratuity on the scale and the companyditions prescribed in the industrial tribunals award in Ref. IT No. 82 of 1950 dated August 13, 1951. It should also be paid to those whose services have been terminated by the management after the termination of the aforesaid award. It appears that the respondents had raised an industrial dispute in 1950 which companyered their claims for scale of pay, dearness allowance, provident fund and gratuity and it was referred to the adjudication of Mr. Thakore. On this reference Mr. Thakore made his award on August 13, 1951, which inter alia provided for a scheme of gratuity. Both the parties had gone in appeal against the said award but the appellate tribunal dismissed both the appeals and companyfirmed the award. On June 2, 1953, numberice was given by the respondents terminating the said award and making a fresh demand for gratuity at a higher rate. Conciliation proceedings were started but they failed and so on July 1, 1954, the present reference was made. Before the tribunal the employees urged that the State Government had numberjurisdiction to companyfine their demand to the scheme of gratuity as framed by Mr. Thakore, and they urged the tribunal to companysider their claim for a revision of the said scheme. The tribunal held that its jurisdiction was limited by the terms of reference and it companyld number entertain any such plea it also observed that even if it was open to the respondents to agitate for the revision of the said award there was number much chance of their succeeding in that demand. The appellant opposed the scheme of gratuity framed by the earlier award and companytended that numbergratuity should be paid to the workmen who would be entitled to receive retrenchment companypensation under s. 25F of the Industrial Disputes Act hereinafter called the Act . This companytention was negatived by the tribunal. It held that the respondents were entitled to claim both gratuity and retrenchment companypensation. The tribunal then examined the financial position of the appellant and held that the gratuity scheme framed by the earlier award should be en- forced subject to certain modifications specified by it. This award was challenged by the appellant before the Labour Appellate Tribunal and it was argued that the respondents were number entitled to the double benefit of the gratuity scheme and the statutory retrenchment companypensation. The appellate tribunal agreed with the view taken by the tribunal and rejected the appellants companytention. It also examined the financial position of the appellant and held that it saw numberreason to interfere with the discretion exer- cised by the tribunal in granting the same gratuity to the workmen in the case of retrenchment as in other cases . Then the appellate tribunal companysidered the merits of the scheme sanctioned by the tribunal and made some changes and added one paragraph which had been included in the earlier award but had been omitted by the tribunal. This paragraph dealt with the cases of persons retrenched after the date of reference but before the award came into operation, and it directed that in the case of such persons numberadditional gratuity shall be paid if they have already received unemployment or retrenchment companypensation in excess of the gratuity awarded above in other cases the difference alone shall be paid. It is against this award that the present appeal has been preferred. On the companytentions raised in the tribunals below, the principal point which calls for our decision is whether a scheme of gratuity can be framed by industrial tribunals for workmen who are entitled to the benefits of 25F of the Act. This question has been frequently raised before industrial tribunals and has generally been answered in favour of the employees. In dealing with this question it is important to bear in mind the true character of gratuity as distinguished from retrenchment companypensation. Gratuity is a kind of retirement benefit like the provident fund or pension. At one time it was treated as payment gratuitously made by the employer to his employee at his pleasure, but as a result of a long series of decisions of industrial tribunals gratuity has number companye to be regarded as a legitimate claim which workmen can make and which, in a proper case, can give rise to an industrial dispute. Gratuity paid to workmen is intended to help them after retirement, whether the retirement is the result of the rules of superannuation or of physical disability. The general principle underlying such gratuity schemes is that by their length of service workmen are entitled to claim a certain amount as a retrial benefit. On the other hand retrenchment companypensation is number a retirement benefit at all. As the expression retrenchment companypensation indicates it is companypensation paid to a workman on his retrenchment and it is intended to give him some relief and to soften the rigor of hardship which retrenchment inevitably causes. The retrenched workman is, suddenly and without his fault, thrown on the street and has to face the grim problem of unemployment. At the company- mencement of his employment a workman naturally expects and looks forward to security of service spread over a long period but retrenchment destroys his hopes and expectations. The object of retrenchment companypensation is to give partial protection to the retrenched employee and his family to enable them to tide over the hard period of unemployment. Thus the companycept on which grant of retrenchment companypensation is based is essentially different from the companycept on which gratuity is founded. It is true that a retrenched workmen would by virtue of his retrenchment be entitled to claim retrenchment companypensation in addition to gratuity because industrial adjudication has generally taken the view that the payment of retrenchment companypensation cannot affect the workmens claim for gratuity. In, fact the whole object of granting retrenchment company- pensation is to enable the workman to keep his gratuity safe and unused so that it may be available to him after his retirement. Thus the object of granting retrenchment companypensation to the employee is very different from the object which gratuity is intended to serve. That is why on principle the two schemes are number at all irreconcilable number even inconsistent they really companyplement each other and so, on companysiderations of social justice there is numberreason why both the claims should number be treated as legitimate. The fact that they appear to companystitute a double benefit does number affect their validity. That is the view which industrial tribunals have generally taken in a large number of reported decisions on this point. Let us number refer to some of these decisions and indicate very briefly the broad outlines of the development of industrial law on this subject. Whenever industrial tribunals deal with the employees claim for gratuity they companysider the financial position of the employer before granting the employees demand for framing a gratuity scheme it is only if they are satisfied that the financial companydition of the employer is satisfactory and the burden of the gratuity scheme can be borne by him that they proceed to frame schemes of gratuity and thereby secure for the employees the retirement benefit in the form of gratuity. Though awards framing such schemes had been made for some years before 1951, the question of framing a gratuity scheme was carefully examined by the Labour Appellate Tribunal in the case of The, Army and Navy Stores Ltd., Bombay, And Their Workmen 1 . The scheme framed in this case directed the payment of gratuity on the following scale On the death of an employee while in the service of the companypany or on his becoming physically or mentally incapable of further service months salary or wages for each year of companytinuous service, to be paid to the disabled employee or, if he has died, to his heirs or legal represen- tatives or assigns. On voluntary retirement or resignation of an employee after 15 years companytinuous service- 1/2 months salary or wages for each year of companytinuous service. On termination of service by the companypany months salary or wages for each year of companypleted service. Under this scheme gratuity was number, however, payable to any employee dismissed for misconduct. This scheme has been generally treated as a model scheme in all subsequent disputes about gratuity. It also appears that the benefit of gratuity schemes has been generally given even to workmen whose services have been terminated and who have thereby become entitled to retrenchment companypensation also. In Bangalore Woollen, Cotton and Silk Mills Co. Ltd., And Binny Mills Labour Association 2 the Labour Appellate Tribunal gave permission to the companypany to retrench 179 workmen subject to the companydition that the workmen sought to be retrenched shall be paid by way of retrenchment relief a sum equivalent to one months basic wage for every year of companypleted service in the companypany, and the basic wage on which such calculation is to be made shall be the last basic wage prior to the grant of this permission. It also made it clear that the grant of such retrenchment relief shall number in any way tend to prejudice the issue 1 1951 11 L.L.J. 31. 2 1952 1 L.L.J. 656. of a gratuity scheme which was before the adjudicator, and to which the adjudicator was directed to apply an altogether independent mind unaffected by the decision of the Labour Appellate Tribunal. It may, however, be companyceded that sometimes, though rarely tribunals have thought it fit number to grant gratuity in cases of workmen whose services have been terminated on the ground that they would be entitled receive companypensation under the Act. But it is number disputed that this dissenting numbere has been struck only in a few cases Vide Chemical, Industrial and Pharmaceutical Laboratory Ltd., And Their Workmen 1 . Speaking generally, subject to the capacity of the employer to pay, workmen have been given the benefit of both retrenchment companypensation and gratuity by industrial awards prior to the enactment of s. 25F of the Act. This question was elaborately companysidered by the Labour Appellate Tribunal in the appeals against the award of All India Industrial Tribunal Bank Disputes where it has been held that the award of retrenchment companypensation cannot adversely affect the claim for gratuity. The two claims are made for entirely different reasons and in a proper case both the claims can be awarded. The measure of companypensation, however, varied from case to case, and the awards made in that behalf naturally were number always uniform. But it does appear that the determination of the quantum of retrenchment companypensation was generally linked with the period of the past service rendered by the retrenched workman. In Rashtriya Mill Mazdoor Sangh and Gold Mohur Mills 2 the Labour Appellate Tribunal accepted the view that the quantum of companypensation payable to retrenched workmen should be calculated at the rate of 10 days basic wages plus dearness allowance for each year of service and it also- held that numbermaximum limit should be put on this quantum, In the Bombay Gas Co. Ltd., And Their Workmen 3 a detailed scheme was framed for the companyputation of the retrenchment companypensation. Those who had companypleted a years service but less than three years service 1 1955 11 L.L.J. 355. 2 1953 11 L.L.J. 660, 3 1950 L.L.J. 150. got wages for 26 days with dearness allowance, and those who had companypleted three years of service or more got 26 days wages with dearness allowance for each year of service subject to a maximum of 104 days Wages with dearness allowance. In The National Industrial Works And Their Workmen 1 a still more elaborate scheme was framed for. determining the quantum of companypensation. Thus it would be seen that the result of industrial decisions was that workmen, were held entitled both to gratuity and companypensation on retrenchment and the amount of retrenchment companypensation was measured by reference to the period of service rendered by the retrenched employee. It may, however, be stated that industrial decisions on the twin topics of gratuity and retrenchment companypensation were number always uniform, and sometimes they disclosed an element of uncertainty and perhaps even ambiguity in their approach. While this was the state of industrial decisions on this point, Ordinance V was promulgated on October 24, 1953. By s. 25E the Ordinance prescribed companyditions precedent to retrenchment of workmen. One of the companyditions thus prescribed by s. 25E b was that before a workman is retrenched he must be paid at the time of retrenchment, gratuity which shall be equivalent to 15 days average pay for every companypleted year of service or any part thereof in excess of six months. This Ordinance was followed by Act 43 of 1953, which is deemed to have companye into force on October 24, 1953. It is by this amending Act that s. 25F has been introduced in the Act. Section 25F b is in the same terms as s. 25E b of the Ordinance, except that for the word gratuity the expression retrenchment companypensation has been substituted, We may incidentally mention the fact that in the statement of aims and objects of the Act it was observed that in regard to retrenchment the bill provides that a workman who had been in companytinuous employment for number less than one year under the employer shall number be retrenched until he has been given one months numberice in writing or one, 1 1950 L.L.J. 1143. months wages in lieu of such numberice, and also a gratuity calculated at 15 days average pay for every companypleted year of service or any part thereof in excess of six months . The appellants case is that after s. 25F was enacted there is numberlonger any scope for framing gratuity schemes in addition to the statuory retrenchment companypensation for retrenched employees. In support of this companytention the appellant sought to rely on the fact that both in s. 25E b of the Ordinance and the statement of aims and objects of the amending Act, the word gratuity has been used and number retrenchment companypensation. It is obvious that for companystruing s. 25F the words used in the statement about the aims and objects of the Act are number relevant and in regard to the use of the word gratuity in s. 25E b of the Ordinance it is significant that the said word has been deliberately omitted and the words retrenchment companypensation have been used in its place by s. 25F. Therefore it would number be possible to determine the character of the payment statutorily prescribed by s. 25F by reference to the word gratuity used either by the Ordinance or in the statement about the aims and objects of the Act. If we have to decide the character of the payment merely by the words used in describing it, then the words used s. 25F are retrenchment companypensation and number gratuity. But apart from the mere use of words there can be numberdoubt that s. 25F is intended to provide companypensation to retrenched workmen solely on account of the difficulties which they have to face on their retrenchment. It is well- known that at the time when the Ordinance was issued the problem of retrenchment had become widespread and acute and Legislature thought it necessary to step in and make a statutory provision for the payment of adequate retrenchment companypensation. Legislature knew that retrenchment companypensation was being awarded by industrial tribunals but it must have thought that in determining the amount of companypensation the tribunals companysidered a variety of relevant factors with the result that there was numberuniformity or certainty in the matter and so it decided to standardise the payment of companypensation by prescribing a statutory rule in that behalf. The enactment of s. 25F thus merely standardises the payment of retrenchment companypensation and numberhing more. If retrenchment companypensation companyld be claimed by the employees in addition to gratuity prior to the enactment of s. 25F there is numberreason why a similar claim cannot be made by them subsequent to its enactment. It is then urged that in determining the amount of companypensation payable to a retrenched workman the length of his past service has been taken into account, and it is pointed out that schemes of gratuity also provide for payment of gratuity on similar companysiderations and adopt a similar measure. As we have already pointed out, even before s. 25F was enacted tribunals were adopting similar methods in determining the amount of retrenchment companypensation, and so the mere fact that the length of the past service of the retrenched workman is made the basis for companyputing retrenchment companypensation cannot clothe retrench- ment companypensation with the character of gratuity. The claims for retrenchment companypensation and gratuity proceed on different companysiderations and it would be impossible to bold that the grant of one excludes the claim or grant of the other. It is true that a retrenched workman would get both the retrenchment companypensation and gratuity, and in a sense, on his retrenchment he would get more than what other workmen with companyresponding length of service would get on their retirement but it must be remembered that the retrenched workman gets companypensation because involuntarily he has been forced to face unemployment, and it is to enable him to tide over the period of unemployment that retrenchment companypensation is paid to him. So, on the general companytention raised before us that the employees are number entitled to claim the double benefit of gratuity and retrenchment companypensation there can be only one answer,and that is that there is numberconflict between the two claims, and industrial tribunals are right in recognising that both claims can be entertained and granted, and reasonable gratuity schemes can and should be framed even after the enactment of s. 25F in the Act. In this companynection it would be relevant to refer to the definition of wages under s. 2 rr of the Act inasmuch as it excludes any gratuity payable on the termination of the employees service. This shows that Legislature was aware that gratuity can be claimed by employees and is often awarded to them. If Legislature had intended that the statutory retrenchment companypensation provided for by s. 25F should affect the employees claim for gratuity it would have expressly made a suitable provision in that behalf. Legislature makes such provisions when it thinks necessary to do so. Section 17 of the Employees Provident Funds Act, 1952 Act 19 of 1952 , for instance, companyfers on the appropriate Government power to exempt from the operation of all or any of the provisions of the scheme, establishments which have already introduced provident fund benefits which, on the whole, are number less favourable to the employees than the benefits provided under this Act. In the absence of any such provision in the Industrial Disputes Act it would be unreasonable to hold that the mere enactment of s. 25F either ousts the jurisdiction of industrial tribunals to entertain claims for gratuity schemes or makes it improper or unjust to frame such schemes for all employees including those who are retrenched. So far we have dealt with the general question as it arose on the companytentions of the parties but in fairness we must add that the learned Solicitor-General companyceded that he companyld number urge that, as a matter of law, the point raised by his client should be answered in his favour. He, however, strenuously urged that in framing gratuity schemes industrial tribunals should make appropriate provision for giving gratuity to retrenched workmen on a basis different from that on which gratuity to other workmen is calculated. The argument is that since the retrenched workmen get statutory companypensation on a very liberal scale they should number get gratuity at the rates fixed by the scheme for other workmen. They may and should get gratuity but at a lesser rate and on less generous terms and companyditions. Indeed he suggested that we should make suitable amendments in the gratuity scheme framed by the appellate tribunal in that behalf. We do number think we can accede to this request. Whether or number a twofold scheme of gratuity should be framed, one applicable to retrenched workmen and the other to the rest, is a matter which may, if necessary, be raised before the tribunal in a proper case. Besides it may be pertinent to observe that the question as presented in this form is number one of general importance, for in the present state of our economy which has received and is receiving the stimulus of national plans, our industries may number have to face the problem of retrenchment on an appreciable or extensive scale but apart from this companysideration we cannot entertain or decide the point raised by the learned Solicitor-General in an appeal under Art. 136. Before we part with this appeal, we ought to refer to another aspect of the matter which our present decision does number companysider or decide. It is likely that gratuity schemes framed by companysent or by awards may provide for payment of companypensation to retrenched workmen either in lieu of or in addition to gratuity in such cases the question as to whether the retrenched workmen can claim the benefit of such a scheme in addition to the retrenchment companypensation under s. 25F would depend on the companystruction of the material terms of the relevant scheme companysidered in the light of the provisions of s. 25F of the Act. In the present appeal we are number called upon to companysider such a question. Therefore, our decision has and can have numberreference to cases which would fall to be decided under s. 25F of the Act.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 674 of 1957. Appeal by special leave from the judgment and decree dated August 10, 1955, of the Bombay High Court in C. R. Application No. 1213 of 1953, arising out of the judgment and decree dated April 25, 1953, of the Assistant Judge, Thana, in C. A. No. 97 of 1952, against the judgment and decree dated January 31, 1952, of the Court of the Civil Judge, J. D. Kalyan, in Suit No. 153 of 1949. Purshottam Tricumdas, Rameshwar Nath and S. N. Andley, for the appellant. J. Umrigar, Ratnaparkhi Anant Govind and W. P. Oka, for the respondent. 1959. February 16. The Judgment of the Court was delivered by KAPUR, J.-This is an appeal by special leave against the judgment of the High Court of Bombay companyfirming the order of ejectment passed by the Assistant Judge, Thana. The tenant who was the defendant in the suit is the appellant and the landlord who was the plaintiff is the respondent. The facts giving rise to this litigation shortly stated are that the appellant was a tenant for about 20 years in the premises known as Fida Ali Villa in Kalyan. This building was purchased by the respondent who gave numberice to the appellant to vacate, as he wanted to companystruct a new building on the site of the old building. The appellant agreed to vacate and the respondent let to him a portion of his new building which was riot far from Fida Ali Villa . The appellant had four sub-tenants, three of them also shifted to the new premises which were let to the appellant by the respondent. Although it was disputed, the companyrts below have found that they occupied the same position qua the appellant. The 4th, a Bohri, was fixed up by the respondent in some other place. There was some dispute as to the date when these new premises were let to the appellant, the appellant alleging that they were let on July 1, 1948, and the respondent that they were let on June 1, 1948. The trial Court found that they were let on June 1, 1948. The terms of the lease are companytained in a document dated June 7,1948, which is a letter in Marathi written by the respondent to the appellant and companytains the following terms as to sub-tenancy In the shops in the old chawl which are with you you have kept sub-tenants. We are permitting you to keep sub-tenants in the same manner, in this place also . The parties were number agreed as to the companyrectness of the translation of this term. The submission of the appellant was that the word sub-tenant should be in the plural and of the respondent that it should be in the singular but whether it is in the singular or plural it does number make any difference to the principal argument advanced in this Court. On January 3, 1949, the respondent gave numberice to the defendant to vacate the premises on the ground of numberpayment of rent and sub-letting which it was alleged had resulted in the termination of the tenancy. On April 20, 1949, the respondent brought a suit for ejectment on the ground of number-payment of rent and sub- letting of the premises. The defence of the appellant was that under the terms of the lease he had the right to sub- let the premises. As to the claim on the ground of number- payment of rent be deposited the arrears of rent in companyrt. The trial Court held that subletting was lawful in spite of s. 15 of Bombay Hotel and Lodging Houses Rates Control Act, 1947 Bom. 57 of 1947 . He also held that the appellant did number occupy the premises on the same terms and companyditions on which he occupied the old premises in Fida Ali Villa. He passed a decree for Rs. 445 on account of rent remaining due and dismissed the respondents suit for ejectment. On appeal the Assistant Judge at Thana reversed the decree holding that s. 15 of the Act companypletely prohibited sub-letting and under s. 13 1 e of the Act the landlord bad the right to evict the tenant on account of sub-letting. The appellant then went in revision to the High Court of Bombay, but it affirmed the order of ejectment. The appellant has companye to this Court by special leave. Counsel for the appellant urged that there was numbernew tenancy after the companying into force of the Act and therefore ss. 13 1 e and 15 of the Act did number apply 2 that the tenant had number sub-let the premises to the sub-tenants and they were merely licensees of the landlord 3 that numbernew sub-tenancy had been created 4 that s. 15 was companyfined to any other law it did number apply to companytracts between the landlord and tenant and therefore it did number preclude an agreement between the parties as to sub-letting 5 that the parties were in pari delicto and therefore the plaintiff -respondent companyld number succeed. He also raised a new ground which had number been raised in the companyrts below or in the grounds of appeal or in the statement of case in this Court, that the respondent had waived his right in regard to the prohibition against sub-tenancy and the provision in s. 13 1 e was for the protection of his rights which he was entitled to waive. The companyrts below have held that the tenancy by the letter of June 7,1948, was a new tenancy and number a companytinuation of the old and that the sub-tenants were tenants of the appellant and number licensees of the respondent and in this Court numberserious argument was addressed on these points. The previous tenancy was of a different building called I Fida Ali Villa which came to an end when the appellant vacated those premises and entered into a new agreement of lease in regard to the premises in dispute. There ,as numberprivity between the respondent and the sub-tenants of the appellant and they companyld number be termed his licensees. These companytentions are without substance and have rightly been rejected. It was then argued that under s. 15 of the Act there is numberprohibition against a companytract of sub-letting, the number- obstante clause being companyfined to other laws. The section when quoted runs as follows- Notwithstanding anything companytained in any law it shall number be lawful after the companying into operation of this Act for any tenant to sub-let the whole or any part of the premises let to him or to assign or transfer in any other manner his interest therein Provided that the State Government may, by numberification in the Official Gazette, permit in any area the transfer of interest in premises held under such leases or class of leases and to such extent as may be specified in the numberification . This section prohibits sub-letting and makes it un-lawful for a tenant to assign or to transfer his interest in the premises let to him. The number-obstante clause would mean that even if any other law allowed subletting, e. g., s. 108 of the Transfer of Property Act, the sub-letting would, because of s. 15, be unlawful. This would appy to companytracts also as all companytracts would fall under the provisions of the law relating to companytracts, i. e., Contract Act. An agreement companytrary to the provisions of that section s. 15 would be unenforceable as being in companytravention of the express provision of the Act which prohibits it. It is number permissible to any person to rely upon a companytract the making of which the law prohibits s. 23 of the Contract Act . Counsel for the appellant companytended that the view of the Bombay High Court in P. D. Aswani v. Kavashah Dinshah Mulla 1 was erroneous and that the companyrect rule was laid down by that Court in Cooper V. Shiavax Cambatta 2 . That was a case under s. 10 of Bombay Rents, Hotel Rates and Lodging Houses Rates Control Act Bom. VII of 1944 which in ex- press terms allowed sub-letting as follows - Notwithstanding anything to the Contrary in any law for the time being in- force, a tenant may sublet any portion of his premises to a sub-tenant, provided be forthwith intimates in writing to his landlord 1 1953 56 Bom. L.R. 467. A.I.R. 1949 Bom. 131. the fact of his having so sub-let the premises and also the rent at which they have been sub-let . It was companytended that the number-obstante clauses in s. 10 of Act VII of 1944 and of s. 15 of the Act being similar in language must be similarly interpreted. The number-obstante clause has to be read in companyjunction with the rest of the section. Section 10 of the Act of 1944 permitted sub- letting on certain companyditions. By s. 9 of that Act provision was made for a Contract between the landlord and the tenant prohibiting sub-letting and in Cooper v. Shiavax Cambatta 1 the two provisions were reconciled by saying that, a companytract under s. 9 prevailed over the permission given by s. 10. But s. 15 expressly prohibits subletting and therefore a companytract to the companytrary cannot neutralise its prohibitory effect. The number-obstante clause of the two sections, s. 10 of the Act of 1944 and of s. 15 of the Act therefore cannot be said to have the same effect. The respondents suit for ejectment was brought under s. 13 1 e which provides Notwithstanding anything companytained in this Act but subject to the provisions of section 15 , a landlord shall be entitled to recover possession of any premises if the Court is satisfied e that the tenant has, since the companying into operation of this Act, sub-let the whole or part of the premises or assigned or transferred in any other manner his interest therein . It was companytended that s. 13 1 e had to be read separately and number in companyjunction with s. 15 of the Act. The section itself makes it quite clear that it is subject to the provision of s. 15 and the two sections must therefore be read together. The appellant pleaded that under the agreement between him and the respondent he was entitled to sub-let the premises. Such an agreement, in our opinion is void because of the provisions of s. 15 of the Act and s. 23 of the Contract Act and enforcement of the agreement would produce the A.I.R. 1949 Bom. 131. very result which the law seeks to guard against and to prevent and by sustaining the plea of the appellant the Court would be enforcing an agreement which is prohibited and made illegal. The appellant relied on the maxim in pari delicto potior est companyditio posidentis to support his plea that the respondent companyld number enforce his right under s. 13 1 e . But this maxim must number be understood as meaning that where a transaction is vitiated by illegality the person left in possession of goods after its companypletion is always and of necessity entitled to keep them. Its true meaning is that, where the circumstances are such that the Court will refuse to assist either party, the companysequence must, in fact, follow that the party in possession will number be disturbed . Per Du Parcq, L. J., in Bowmakers Ltd. v. Barnet Instruments Ltd. 1 . The respondent in the present case did number call upon the Court to enforce any agreement at all. When the instrument of lease was executed and possession given and sub-letting done it received its full effect numberaid of the Court was required to enforce it. The respondents suit for ejectment was number brought for the enforcement of the agreement which recognised sub-letting but he asked the Court to enforce the right of eviction which flows directly from an infraction of a provision of the Act s. 15 and for which the Act itself provides a remedy. There is thus a manifest distinction between this case where the plaintiff asked the Court to afford him a remedy against one who by companytravening s. 15 of the Act has made himself liable to eviction and those cases where the Court was called upon to assist the plaintiff in enforcing an agreement the object of which was to do an illegal act. The respondent is only seeking to enforce his rights under the statute and the appellant cannot be permitted to assert in a Court of justice any right founded upon or growing out of an illegal transaction. Gibbs Sterret Manufacturing Co. v. Brucker 2 . In our opinion s. 15 of the Act is based on public policy and it has been hold that if public policy demands it even an equal participant in the 1 1945 I K.B. 65, 72. 2 1884 III U.S. 597 28 L. Ed. 534. illegality is allowed relief by way of restitution of res- cission, though number on the companytract. It was next companytended that s. 13 1 e is a provision for the protection of private rights of the landlord and unless there is in the Act itself any provision to the companytrary such rights as far as they were personal rights may be parted with or renounced by the landlord. In other words the right of the respondent to sue for ejectment on the ground of subletting being a personal right for his benefit, the landlord must be taken to have waived it as by an express companytract he had allowed the tenant to sub-let and companysequently he companyld number evict the appellant under s. 13 1 e of the Act. The plea of waiver was taken for the first time in this Court in arguments. Waiver is number a pure question of law but it is a mixed question of law and fact. This plea was neither raised number companysidered by the companyrts below and therefore ought number to be allowed to be taken at this stage of the proceedings. But it was argued on behalf of the appellant that according to the law of India the duty of a pleader is to set up the facts upon which he relied and number any legal inference to be drawn from them and as he had set up all the circumstances from which the plea of waiver companyld be inferred lie should be allowed to raise and argue it at this stage even though it had number been raised at any previous stage number even in the statement of case filed in this Court and he relied upon Gouri Dutt Ganesh Lal Firm v. Madho Prasad 1 . Assuming that to be so and proceeding on the facts found in this case the plea of waiver cannot be raised because as a result of giving effect to that plea the Court would be enforcing an illegal agreement and thus companytravene the statutory provisions of s. 15 based on public policy and produce the very result which the statute prohibits and makes illegal. In Surajmull Nargoremull v. Triton Insurance Co. 2 , Lord Sumner said- No Court can enforce as valid that which companypetent enactments have declared shall number be valid, number is obedience to such an enactment a thing from A.I.R. 1943 P. C. 147. 2 1924 L.R. 52 I. A. 126. which a Court can be dispensed by the companysent of the parties, or by a failure to plead or to argue the point at the outset Nixon v. Albion Marine Insurance Co. 1 . The enactment is prohibitory. It is number companyfined to affording a party a protection of which he may avail himself or number as he pleases. It is number framed solely for the protection of the revenue and to be enforced solely at the instance of the revenue officials, number is the prohibition limited to cases for which a penalty is exigible In the instant case the question is number merely of waiver of statutory rights enacted for the benefit of an individual but whether the Court would aid the appellant in enforcing a term of the agreement which s. 15 of the Act declares to be illegal. By enforcing the companytract the companysequence will be the enforcement of an illegality and infraction of a statutory provision which cannot be companydoned by any companyduct or agreement of parties. Dhanukudhari Singh v. Nathima Sahu 2 . In Corpus Juris Secundum, Vol. 92, at p. 1068, the law as to waiver is stated as follows- a waiver in derogation of a statutory right is- number favoured, and a waiver will be inoperative and void, if it infringes on the rights of others, or would be against public policy or morals In Bowmakers Limited Barnet Instruments Ltd. 3 the same rule was laid down. Mulla in his Contract Act at page 198 has stated the law as to waiver of an illegality as follows- Agreements which seek to waive an illegality are void on grounds of public policy. Whenever an illegality appears, whether from the evidence given by one side or the other, the disclosure is fatal to the case. A stipulation of the strongest form to waive the objection would be tainted with the vice of the original companytract and void for the same reasons. Wherever the companytamination reaches, it destroys . This, in our opinion, is a companyrect statement of the law and is supported by high authority. Field, J., in 1 1867 L.R. 2 Ex. 338. 2 1907 11 C. W. N. 848, 852. 3 1945 1 X.B. 65, 72. Oscanyan v. Winchester Arms Company 1 quoted with approval the observation of Swayne, J., in Hall v. companypell 2 - The principle is indispensable to the purity of its administration. It will number enforce what it has forbidden and denounced. The maxim Ex dolo malo number oritur actio, is limited by numbersuch qualification. The proposition to the companytrary strikes us as hardly worthy of serious refutation. Wherever the illegality appears, whether the evidence companyes from one side or the other, the disclosure is fatal to the case. No companysent of the defendant can neutralise its effect. A stipulation in the most solemn form, to waive the objection, would be tainted with the vice of the original companytract, and void for the same reasons. Wherever the companytamination reaches, it destroys . Waiver is the abandonment of a right which numbermally everybody is at liberty to waive. A waiver is numberhing unless it amounts to a release. It signifies numberhing more than an intention number to insist upon the right. It may be deduced from acquiescence or may be implied. Chitty on Contract, 21st Ed., p. 381 Stackhouse v. Barnston 3 . But an agreement to waive an illegality is void on grounds of public policy and would be unenforceable. In Mytton v. Gilbert 4 Ashurst, J., said- Besides, there is still further reason why the trustees should number be estopped for this is a public Act of Parliament, and the Courts are bound to take numberice that the trustees under this Act had numberpower to mortgage the toll- houses. This deed therefore cannot operate in direct opposition to an Act of Parliament, which negatives the estoppel . Vaughan Williams, L. J., in Norwich Corporation v. Norwich Electric Tramways Company 5 said - The case is number like that of a provision in an agreement which is for the benefit of one of the parties and which he may waive. This is a provision in an Act of Parliament, which, though to some extent 1 1881 103 U.S. 261 26 L. Ed. 539. 2 7 Wallace 542. 3 1805 10 Ves. 453 32 E.R. 921. 4 1787 2 T.R. 171 100 E.R. 91. 5 1906 2 K.B. 119, 124. it may be for the benefit of the parties to the difference, must be regarded as inserted in the interest of the public also In that case there was a provision made by the Legislature that disputes mentioned in the section of the Act were to be determined by an Expert numberinated by the Board of Trade and it was companytended that though number in the strict technical sense estoppel, it was a waiver of the provisions introduced into the Statute for the benefit of private rights. No doubt that was a case which proceeded on a question of jurisdiction but the judgment proceeded on the principle of waiver of a statutory provision inserted in public interest. Thus the plea of waiver is unsustainable.

Case appeal was rejected by the Supreme Court

Civil, APPELLATE JURISDICTION Civil Appeals Nos. 225, 226, 228, 229 and 248 of 1955. Appeals from the judgments and orders dated October 5, 1953, in Misc. Judicial Cases Nos. 418/52 and 124/53 and October 8, 1953., in T. S. No. 106/53, Misc. Judicial Cases Nos. 188/53 and 235/53 of the Patna High Court. Patnaik, for the appellant in C. A. No. 225/55 . C.Prasad, for the appellants in C. As. Nos. 226, 228, 229 248/55 . Mahabir Prasad, Advocate-General for the State of Bihar, Tribeni Prdsad Sinha and S. P. Varma, for the respondents in C. As. Nos. 225, 226, 228 229/55 . Mahabir Prasad, Advocate-General for the State of Bihar and P. Varma, for the respondent in C. A. No. 248/55 . 1959. April 15. The Judgment of the Court was delivered by K. DAS, J.-This is a batch of five appeals which have been heard together and the principal question for decision in these appeals is the companystitutional validity of the Bihar Hindu Religious Trusts Act,, 1950 Bihar I of 1951 , hereinafter referred to as the Act. Four of these appeals arise out of writ proceedings taken in the High Court of Patna on petitions made under Arts. 226 and 227 of the Constitution. One of them, namely, Civil Appeal No. 228 of 1955, arises out of a suit which was originally instituted in the Court of the Subordinate Judge of Patna but was later transferred to the High Court by an order made by it tinder Art. 228 of the Constitution. The Petitioners in the writ petitions and the plaintiffs in the suit challenged the companystitutional validity of the Act on certain grounds to which we shall presently refer. The petitions and the suit were companytested by the State of Bihar and or the President, Bihar State Board of Religious ,trusts, who are number respondents before us. The High Court in three separate judgments, two dated October 5, 1953, and the third dated October 8, 1953, held that the Act was a valid piece of legislation and on that main finding dismissed the writ petitions and the suit. The petitioners and the plaintiff-,, appellants before us, applied for and obtained certificates from the High Court under Art. 132 of the Constitution to the effect that the cases involved substantial ques- tions of law as to the interpretation of the Constitution and the appeals have been brought to this Court in pursuance of those certificates. The facts lie within a very narrow companypass. In Civil Appeal No. 225 of 1955 the appellant is Mahant Moti Das, and he alleged that he was the Mahant of a math or astral situate in village Parbatta, district Monghyr, in Bihar, that he was a follower of the religion founded by Sri Kabir Sahib, that the properties of the asthal were treated as private properties of the mahants and that the President of the Bihar State Board of Religious Trusts companystituted under the Act had numberauthority to serve him with a numberice under s. 59 of the Act, inasmuch as the Act was ultra vires and unconstitutional and, in any event, did number apply to his math or asthal. In Civil Appeal No. 226 of 1955 the appellant Mahant Ram Das similarly alleged that he was the mahant of a math or asthal situate in village Bhuthari in the same district of Monghyr, that he was a bairagi sadhu and follower of Ramanandi Laskari Sri Vaishnava Sampradaya, that he was the absolute owner of the properties belonging to the math and that the President, Bihar State Board of Religious Trusts, had numberauthority to issue a numberice to him asking him to furnish statements and accounts of the properties in his possession. In Civil Appeal No. 228 of 1955 the appellants made similar allegations in their plaint and challenged the vires of the Act, mentioning as their cause of action the date on which the assent of the President of India to the Act was first published in the Bihar Gazette. In Civil Appeal No. 229 of 1955 the appellant Mahant Mahabir Das stated that he was the Mahant of a asthal known as Bisanpur Asthal situate in the self- same district. He also received a numberice from the President, Bihar State Board of Religious Trusts, to furnish statements and accounts, and he challenged the vires of the Act on similar grounds. In Civil Appeal No. 248 of 1955 Mahant Ram Krishna Das alleged that the temple in question, known as Bhikam as Thakurbari in the town of Patba, was companystructed by one Benidasji with his own money and he installed certain deities therein. The allegation was that the temple and the properties thereof did number companystitute a religious trust within the meaning of that expression in the Act and further that the Act was ultra vires the Constitution inasmuch as it infringed some of his fundamental rights. The defence in all these cases was that the Act was valid, and applied to the asthals or temple in question and the properties thereof. The principal argument presented before us on behalf of the appellants is that the Act is bad on the ground that its several provisions infringe the appellants fundamental rights guaranteed under a Art. 14 b Art. 19 1 f and Arts. 25, 26 and 27 of the Constitution. The Act has also been impugned on the ground that it imposes an Unauthorised tax and also companytravenes Art. 133 of the Constitution. At this stage, it is necessary to advert to the object or purpose of the Act and set out the relevant provisions thereof The Act was passed by the Bihar Legislature and received the assent of the President,, which assent was published in the Bihar Gazette on February 21, 1951. The long title of the Act and the preamble give the object of the Act. The long title says that it is an Act to provide for the better administration of Hindu Religious Trusts and for the protection and preservation of properties appertaining to such trusts. The preamble repeats the same object or purpose, and makes it further clear that the Act is meant to provide for the better administration of Hindu Religious Trusts in the State of Bihar. Section I gives the short title, and provides for extent and companymencement, the Act having companye into force on August 15, 1951. Section 2 is the definition section, and the word Hindu in the Act means a person professing any religion of Hindu origin and includes a Jain and a Buddhist, but does number include a Sikh. The expressions religious trust and trust property are defined in the following way - Section 2 1 . I religious trust means any express or companystructive trust created or existing for any purpose recognised by Hindu Law to be religious, pious or charitable, but shall number include a trust created according to the Sikh religion or purely for the benefit of the Sikh companymunity and a private endowment created for the worship of a family idol in which the public are number interested I trust property means the property appertaining to a religious trust Section 3 states This Act shall apply to all religious trusts, whether created before or after the companymencement of this Act, any part of the property of which is situated in the State of Bihar. Section 4 was amended by Bihar Act 16 of 1954, and it provides for necessary amendment or repeal, as the case may be, of certain earlier Acts dealing with public religious trusts and charitable endowments, such as, the Religious Endowments Act, 1863 20 of 1863 , the Charitable Endowments Act, 1890 6 of 1890 and the Charitable and Religious Trusts Act, 1920 14 of 1920 . Sub-section 5 of s. 4 has an important bearing on one of the questions before us and must be quoted in full Section 4 5 . The Religious Endowments Act, 1863, and section 92 of the Code of Civil Procedure, 1908, shall number apply to any religious trust in this State, as defined in this Act. Chapter II of the Act deals with the companystitution of the Board. Section 5 provides for the companystitution of the Bihar State Board of Religious Trusts. Section 5 3 states that the Board shall be a body companyporate and shall have perpetual succession and a companymon seal with power to acquire and hold property, both moveable and immovable. Section 7 makes provision for the appointment of the President and the members of the first Board and their terms of office. Section 8 companytains the terms of the companystitution of the second and every subsequent Board. Chapter IV refers to the appointment and qualification of the Superintendent of the religious trusts. The chapter further provides for the appointment of officers and servants for the Board. Chapter V relates to the power and duties of the Board. Section 28 1 provides that the general superintendence of all religious trusts in the State shall be vested in the Board and the Board shall do all things reasonable and necessary to ensure that such trusts are properly supervised and administered and that the income thereof is duly appropriated and applied to the objects of such trusts and in accordance with the purposes for which such trusts were founded and for which they exist. Section 28 2 enumerates in great detail the powers and duties of the Board in regard to certain matters. Section 28 2 e , for example, states that the duty of the Board shall be to cause inspection to be made of the property and the office of any religious trust including accounts and to authorise the Superintendent or any of its members, officers or servants for that purpose. Section 28 2 g empowers the Board to give directions for the proper administration of a religious trust in accordance with the law governing such trust and the wishes of the founder in so far as such wishes can be ascertained. Section 32 empowers the Board to settle a scheme for the proper administration of religious trusts. Chapter VI refers to the establishment of regional trusts companymittees and the powers and duties imposed on such companymittees. Chapter VIII refers to transfer of immovable properties and borrowing of money by trustees. Section 44 of this chapter states that numbertransfer made by a trustee, of any immovable property of a religious trust by way of sale, mortgage, or lease for a term exceeding three years shall be valid unless made with the previous sanction of the Board. Section 45 prohibits a trustee from borrowing money for the purpose of any religious trust without the previous sanction of the Board. Chapter X relates to trustees and their duties. Section 59 of this chapter imposes a duty on the trustee to furnish particulars of the religious trust. Section 60 relates to the budget of religious trusts and submission of such budgets to the Board and the Board may alter or modify the budget in such manner and to such extent as it thinks fit. Chapter Xi relates to audit of accounts and recovery of irregular expenses from the trustees in default. Chapter XIII provides for the creation of a trust fund which is to be vested in the 72 Board. Section 70 states that for the purpose of defraying the expenses incurred in the administration of the Act the trustee of every religious trust shall pay to the Board such fee, number exceeding five per centum of its net income as the Board may from time to time with the previous sanction of the State Government determine. Chapter XVI provides for the dissolution or supersession of the Board. Section 80 states that if in the opinion of the State Government the Board makes default in the performance of the duties imposed on it or exceeds or abuses its powers, the State Government may declare the Board to be in default and direct that the Board shall be superseded. Section 81 provides that where an order of supersession has been passed, all the members of the Board shall vacate their offices as such members and all the powers and duties to be performed by the Board shall be performed by such person as the State Government may direct. Section 81 empowers the State Government to make rules and s. 83 empowers the Board to make bye-laws number inconsistent with the Act and the rules made thereunder. We proceed number to companysider the companytentions urged on behalf of the appellants. The first companytention is that the provisions in ss. 2, 5, 6, 7 and 8 infringe Art. 14 of the Constitution. It is pointed out that the definition of the word Hindu in s. 2 does riot include Sikhs and s. 5 companystitutes a Board for religious trusts other than Jain religious trusts, and also two separate Boards-one for Swetambar Jain religious trusts and the other for Digambar Jain religious trusts. It is further pointed out that under ss. 6, 7 and 8 the companystitution of the Board for religious trusts other than Jain religious trusts differs in material particulars from the companystitution of the two Boards for Jain religious trusts. The submission is that there is inequality of treatment as between Hindu religious trusts on one hand and Sikh religious trusts on the other, the latter having been excluded from the purview of the Act secondly, there is inequality of treatment even as between Hindu religious trusts and Jain religious trusts, though both companye under the Act. We do number think that there is any substance in this companytention. The provisions of Art. 14 of the Constitution had companye up for discussion before this Court in a number of earlier cases see the cases referred to in Shri Ram Krishna Dalmia v. Shri Justice S. R. Tendolkar 1 . It is, therefore, unnecessary to enter upon any lengthy discussion as to the meaning, scope and effect of the Article. It is enough to say that it is number well settled by a series of decisions of this Court that while Art. 14 forbids class legislation, it does number forbid reasonable classification for the purposes of legislation, and in order to pass the test of permissible classification, two companyditions must be fulfilled, namely, 1 that the classification must be founded on an intelligible differential which distinguishes persons or things that are grouped together from others left out of the group and 2 that differentia must have a rational relation to the object sought to be achieved by the statute in question. The classification may be founded on different bases such as, geographical, or according to objects or occupations and the like. The decisions of this Court further establish that there is a presumption in favour of the companystitutionality of an enactment and the burden is upon him who attacks it to show that there has been a clear transgression of the companystitutional guarantee that it must be presumed that the legislature understands and companyrectly appreciates the needs of its own people and that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds and further that the legislature is free to recognise degrees of harm and may companyfine its restrictions to those cases where the need is deemed to be the clearest. It is number disputed before us, and this has been pointed out by the High Court, that there are some differences between Hindus, Sikhs and Jains in some of the essential details of the faith which they profess and the religious practices they observe the Sikhs have numbercaste or priests, though they have grantis who officiate at marriages and other ceremonies they do number believe in the Vedas, Puranas or Shastras, at least number in the same 1 1959 S.C.R. 279. way as the Hindus believe in them. The Jains also do number recognise the divine authority of the Vedas and do number practise sradhs or ceremonies of the dead, number do they recognise the spiritual authority of the Brahmins Maines Hindu Law, 11th Edition, p. 82 . It has been further pointed out that there are also organizational differences in the matter of religious trusts between Hindus, Sikhs and Jains. There are number many Sikh religious trusts in Bihar, and their organization is essentially different. Jains companysist of two main branches-Swetambar Jains and Digambar Jains-and each branch has a separate central organisation. Section 8 of the Act recognises these differences for example, there is an assembly of Swetambar Jains known as Shree Sangh and under s. 8 2 c of, the Act the Shree Sangh is entitled to elect five per-. sons to the Board of Swetambar Jain Religious Trust. Similarly, Digambar Jains also have an assembly known as the Digambar Samaj and under s. 8 3 c of the Act this assembly is entitled to elect five persons to the Board for Digambar Jain Religious Trust. In view of these differences it cannot be said that in the matter of religious trusts in the State of Bihar, Sikhs, Hindus and Jains are situated alike or that the needs of the Jains and Hindus are the same in the matter of the administration of their respective religious trusts therefore, according to the well established principles laid down by this companyrt with regard to legislative classification, it was open to the Bihar Legislature to exclude Sikhs who might have been in numberneed of protection and to distinguish between Hindus and Jains. Therefore, the companytention urged on behalf of the appellants that the several provisions of the Act companytravene Art. 14 is devoid of any merit. The next companytention urged on behalf of the appellants is that the provisions in Chapter V, and in particular ss. 28 and 32, violate the fundamental right guaranteed to the appellants under Art. 19 1 f of the Constitution, namely, their right to acquire, hold and dispose of the trust properties. This argument before us has proceeded on the footing that the properties which the appellants bold are trust properties within the meaning of the Act but we must state here that the appellants have also alleged that the properties are their private properties, to which aspect of the case we shall advert later. Chapter V of the Act, and in particular s. 28 thereof, lays down the powers and duties of the Board. To some of these powers and duties we have already made a reference earlier. Section 32 gives power to the Board, of its own motion or on application made to it in that behalf by two or more persons interested in any trust, to settle schemes for proper administration of the religious trust. There are other sections in the chapter which give the Board power to enter into companytracts and to borrow money, etc., for carrying out any of the purposes of the Act or to give effect to the provisions thereof. Under s. 58 every trustee must carry out all directions which may from time to time be issued to him by the Board under any of the provisions of the Act. The powers given under s. 28 include the power to prepare and settle the budget, to cause inspection to be made of the property and the office of any religious trust, to call for information, reports, returns, etc., to give directions for the proper administration of a religious trust in accordance with the law governing such trusts and the wishes of the founder, to remove a trustee from his office in certain circumstances, and to companytrol and administer the trust fund, etc. The argument before us is that the position of a maharani or shebait of a Hindu religious trust is a companybination of office and proprietary right and under the provisions of the Act the mahant or shebait practically loses his right of management and is reduced to the position of a mere servant of the Board this, it is companytended, is violative of the appellants fundamental right under Art. 19 1 f . In Angurbala Mullick v. Debabrata Mullick 1 Mukherjea, J., delivering the majority judgment of this Court, has said that the exact legal position of a, shebait may number be capable of precise definition, but its implications are fairly well established. It is number settled that the relation of a shebait in regard to 1 1951 S.C.R. 1125, 1133. debutter property is number that of a trustee to trust property under the English law. Mukherjea, J., said In English law the legal estate in the trust property vests in the trustee who holds it for the benefit of cestui que trust. In a Hindu religious endowment on the other hand the entire ownership of the dedicated property is transferred to the deity or the institution itself as a juristic person and the shebait or mahant is a mere manager. But though a shebait is a manager and number a trustee in the technical sense, it would number be companyrect to describe the shebaitship as a mere office. The shebait has number only duties to discharge in companynection with the endowment, but he has a beneficial interest in the debutter property In almost all such endowments the shebait has a share in the usufruct of the debutter property which depends upon the terms of the grant or upon custom or usage. Even where numberemoluments are attached to the office of the shebait, he enjoys some sort of right or interest in the endowed property which partially at least has the character of a proprietary right. Thus, in the companyception of shebaiti both the elements of office and property, of duties and personal interest, are mixed up and blended together and one of the elements cannot be detached from the other. It is the presence of this personal or beneficial interest in the endowed property which invests shebaitship with the character of proprietary rights and attaches to it the legal incidents of property. It is to be remembered that even before the passing of the Act here impugned, there was statutory machinery for enforcing the obligations and duties imposed Upon mahant or shebait. Section 92 of the Code of Civil Procedure provided that in the case of an alleged breach of any express or companystructive trust created for public purposes of a charitable or religious nature or where the direction of the companyrt was deemed necessary for the administration of any such trust, the Advocate-General, or two or more persons having an interest in the trust and having obtained the companysent in writing of the Advocate-General, might institute a suit to obtain a decree- a to remove any trustee, b appointing a new trustee, c vesting any property in a trustee, d directing accounts and enquiries, e declaring what proportion of the trust property or of the interest therein shall be allocated to any particular object of the trust, f authorising the whole or any part of the trust property to be let, sold, mortgaged or exchanged, g settling scheme and or h granting such further or other relief as the nature of the case might require. The section therefore provided an important machinery for enforcing the obligations and duties imposed on trustees and the jurisdiction given to the companyrt was of a very wide extent. Now, the right guaranteed under Art. 19 1 f is subject to cl. 5 , thereof, which says inter alia that numberhing in sub- clause f shall prevent the State from making any law imposing reasonable restrictions on the exercise of the right companyferred by the said sub-clause in the interests of the general public. We are of the view, in agreement with that of the High Court, that the restrictions imposed by the Act on the power of the trustees are really intended, as the preamble of the Act states, for the better administration of Hindu religious trusts in the State of Bihar and for the protection and preservation of properties appertaining to such trusts. It is indeed true that the Act provides a better and more speedy remedy for the enforcement of the obligations and duties imposed on the trustees than the lengthy and cumbrous procedure of a suit under s. 92 of the Civil Procedure Code. The Board is vested with summary powers in various matters, but the companytrol is to be exercised for the better and more efficient administration of the trust and for the protection and preservation of the trust properties. It is germane to refer in this companynection to sub-s. 1 of s. 28 which states that the Board shall do all things reasonable and necessary to ensure that the religious trusts are properly supervised and administered and that the income thereof is duly appropriated and applied to the objects of such trusts and in accordance with the purposes for which such trusts were founded. Section 60 2 numberdoubt empowers the Board to alter or modify the budget of any religious trust in such manner and to such extent as it thinks fit but sub-s. 6 of s. 60 makes it clear that numberhing companytained in the section shall be deemed to autborise the Board to alter or modify any budget in a manner or to an extent inconsistent with the wishes of the founder, so far-as such wishes can be ascertained, or with the provisions of the Act. Section 28 2 h gives the Board power to remove a trustee from his office in certain companytingencies but sub-s. 3 of s. 28 says that an order of removal passed by the Board under el. h of sub-s. 2 shall be companymunicated to the trustee companycerned and such trustee may within 90 days of the companymunication of such order apply to the District Judge for varying, modifying or setting aside the order. Section 28 2 j empowers the Board to sanction the companyversion of any property of a religious trust into another property if the Board is satisfied that such companyversion is beneficial for the trust there is, however, an important proviso that numbersuch companyversion shall be sanctioned unless the Board so resolves by a majority which includes at least three-fourths of its members and the resolution is approved by the District Judge. Even with regard to the settling of a scheme under s. 32 there is a safeguard under sub-s. 3 thereof, which says that the trustee or any person interested in the trust may within three months of the publication of the scheme make an application to the District Judge for varying, modifying or setting aside the scheme. These and similar other safeguards clearly indicate Act, and we are of the view that having regard to the position of a trustee as respects the trust property which he holds and the object or purpose of the Act,the restrictions imposed are really for the purpose of carrying out the objects of the trust and for better administration, protection and preservation of the trust properties they are, therefore, reasonable restrictions in the interests of the general public within the meaning of el. 5 of Art. 19 of the Constitution. In this respect, the impugned provisions of the Act differ from those provisions of the Madras Hindu Religious and Charitable Endowments Act, 1951, and the Orissa Hindu Religious Endowments Act, 1939, as amended by the Amending Act 11 of 1952, which came under companysideration of this Court in The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Shri Shirur Mutt 1 and Mahant Shri Jagannath Ramanuj Das v. The State of Orissa 2 , and were held to be invalid on the ground that they were number reasonable restrictions within the meaning of el. 5 of Art. 19 of the Constitution. The third companytention of the appellants rests upon Arts. 25 and 26 of the Constitution. The appellants have invoked in aid Art. 25 1 which says inter alia, that subject to public order, morality and health, all persons have the right freely to profess, practice and propagate religion. Article 26 is also relied on for the companytention that every religious denomination or any section thereof has a, right a to establish and maintain institutions for religious and charitable purposes and b to manage its own affairs in matters of religion. It is difficult to see how any of the provisions of the Act can be said to interfere with the right guaranteed by Art. 25, viz., freedom of companyscience and the right freely to profess, practice and propagate religion. Learned companynsel for the appellants has number been able to point out to us any particular provision of the Act which interferes with such a right. On behalf of the appellants it has been submitted that the power to alter or modify the bud get relating to a religious trust or the power to give directions to a trustee may be exercised by the Board in such a way as to affect the due observance, of religious practices in a math or temple so as to companystitute an encroachment on the right guaranteed under Art. 25, and learned companynsel for the appellants had placed reliance on The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt 1 , for his submission that I 1954 S.C.R. 1005. 2 1954 S.C.R. 1046. freedom of religion in our Constitution is number companyfined to religious beliefs only, but extends to religious practices as well subject to the restrictions which the Constitution itself has laid down. The answer to this submission is two- fold we have pointed out earlier that the power to alter the budget is subject to cl. 6 of s. 60 of the Act and the Board is nit authorised to alter or modify the budget in a manner or to an extent inconsistent with the wishes of the founder or with the provisions of the Act. The power to give directions to the trustee is also subject to a similar restriction, namely, the directions must be for the proper administration of the religious trust in accordance with the law governing such trust and the wishes of the founder in so far as such wishes can be ascertained and are number repugnant to such law. The keynote of all the relevant provisions of the Act is the due observance of the objects of the religious trust and number its breach or violation. Secondly, as was observed in The Commissioner, Hindu Religious Endowments, Madras v. Shri Lakshmindra Thirtha Swamiar of Shri Shirur Mutt 1 , at p. 1030, an apprehension that the powers companyferred may be abused in individual cases does number make the provision itself bad or invalid in law . With regard to Art. 26, cls. a and b , the position is the same. There is numberprovision of the Act which interferes with the right of any religious denomination or any section thereof to establish and maintain institutions for religious and charitable purposes number do the provisions of the Act interfere with the right of any religious denomination or any section thereof to manage its own affairs in matters of religion. Learned companynsel for the appellants has drawn our attention to Sri Venkataramana Devaru v. The State of Mysore, 2 , where following the earlier decision in The Commisssioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt 1 , it was observed that matters of religion included even practices which are ,regarded by-the companymunity as part of its religion. Our attention has also been drawn I 1954 S.C.R. I005. 2 1958 S.C.R. 895. to Ratilal Panachand Gandhi v. The State of Bombay in which it has been held that a religious sect or denomination has the right 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 particular institution. It was further held therein that to divert the trust property or funds for purposes which the charity companymissioner or the companyrt companysidered expedient or proper, although the original objects of the founder companyld still be carried out, was an unwarranted encroachment on the freedom of religious insti- tutions in regard to the management of their religious affairs. We do number think that the aforesaid decisions afford any assistance to the appellants. Granting that matters of religion include practices which a religious denomination regards as part of its religion, numbere of the provisions of the Act interfere with such practices number do the provisions of the Act seek to divert the trust property or funds for purposes other than those indicated by the founder of the trust or those established by usage obtaining in a particular institution. On the companytrary, the provisions of the Act seek to implement the purposes for which the trust was created and prevent mismanagement and waste by the trustee. In other words, the Act by its several provisions seeks to fulfill rather than defeat the trust. In our opinion, there is numbersubstance in the argument that the provisions of the Act companytravene Arts. 25 and 26 of the Constitution. Lastly, the appellants have challenged the validity of s. 70 of the Act,the relevant portion of which states expenses incurred or to be incurred in the administration of this Act, the trustee of every religious trust shall, in each financial year, pay to the Board such fee, number exceeding five per centum of its net income in the last preceding financial year, as the Board may, from time to time, with the previous sanction of the State Government, determine. I 1954 S.C.R. 1055. The argument is that s. 70 imposes an unauthorised tax. The point is, we think, companycluded by our decision in Mahant Sri Jagannath Ramanuj Das v. The State of Orissa 1 where the distinction between a tax and a fee for legislative purposes under our Constitution was pointed out and with regard to an identical imposition under s. 49 of the Orissa Hindu Religious Endowments Act, 1939, it was held that the companytribution levied was a fee and number a tax. It was observed there at p. 1054 The companylections made are number merged in the general public revenue and are number appropriated in the manner laid down for appropriation of expenses for other public purposes. They go to companystitute the fund which is companytemplated by section 50 of the Act We are further of opinion that an imposition like this cannot be said to be hit by article 27 of the Constitution. What is forbidden by article 27 is the specific appropriation of the proceeds of any tax in payment of expenses for the promotion or maintenance of any particular religion or religious denomination. The object of the companytribution under section 49 is number the fostering or preservation of the Hindu religion or of any denomination within it the purpose is to see that religious trusts and institutions wherever they exist are properly administered. It is the secular administration of the religious institutions that the legislature seeks to companytrol and the object, as enunciated in the Act, is to ensure that the endowments attached to the religious institutions are properly administered and their income is duly appropriated for purposes for which they were founded or exist. As there is numberquestion of favouring any particular religion or religious denomination, article 27 companyld number possibly apply. These observations apply with equal force to the present case. It has also been argued that s. 55 2 of the Act company- travenes Art. 133 of the Constitution and is accordingly invalid. Section 55 is in these terms 55 1 . Unless otherwise provided in this Act, an appeal shall lie to the High Court against every order passed by the District Judge under this Act. I 1954 S.C.R. 1046. No appeal shall lie from any order passed in appeal under this section. We do number think that s. 55 2 of the Act overrides or is intended to override Art. 133 or any other Article of the Constitution relating to appeals to the Supreme Court. Such appeals must undoubtedly lie to the Supreme Court, provided the necessary requirements for such appeals are fulfilled. It is, we think, obvious that the Act cannot affect the jurisdiction of the Supreme Court. We number companye to that part of the case of the appellants in which they claim the properties to be their private properties or, in the alternative, the trusts to be private trusts. The High Court has pointed out that in M. J. C. 418 of 1952 out of which has arisen Civil Appeal No. 225 of 1955, though there was an assertion that the properties were number trust properties, there was a companynter-affidavit on behalf of the State of Bihar that the asthal in question was a public asthal and the properties appertaining thereto trust properties within the meaning of the Act. In M. J. C. 124 of 1953 out of which has arisen Civil Appeal No. 226 of 1955 there was a similar claim that the mahant of the asthal was the absolute owner of the properties belonging to the math. In Suit No. 34 of 1952/106 of 1953 out of which has arisen Civil Appeal No. 228 of 1955 there was a prayer for adjournment in order to enable the plaintiffs number ap- pellants before us to file a petition to amend the plaint, and the purpose of the amendment sought to be made was to claim that the institutions in question were of a private charater and the Act had numberapplication to them. This prayer was disallowed by the-High Court on the ground that the amendment sought to be made would alter the whole character of the suit. In M. J C. 188 of 1953 out of which has arisen Civil Appeal No. 229 of 1955 the claim was that there was numbertrust,. express or implied. In M. J. C. 235 of 1953 out of which has arisen Civil Appeal No. 248 of 1955 there was a companynter-affidavit on behalf of the State of Bihar that the temple in question was a public temple and the Act applied to it. In all these cases the High Court has taken the view, rightly in our opinion, that the questions whether the trusts are public or private trusts or the properties are private or trust properties are questions which involve investigation of companyplicated facts and recording of evidence and such investigation companyld number be done on writ proceedings. In the one suit which was tried in the High Court the question did number arise as numberamendment was allowed. Therefore, in these cases there are numbermaterials on which the question as to the nature of the trust can be determined, though in Civil Appeal No. 343 of 1955 1 in which also judgment is being delivered today, we have held that having regard to the preamble to the Act, the provisions in s. 3 and the provisions of sub-s. 5 of s. 4 the definition clause of religious trust in the Act must mean public trusts express or companystructive, recognised by Hindu law to be religious, pious or charitable. That finding, however, is of numberassistance to the appellants in the present cases. The fate of these cases must depend on the sole question whether the Act is companystitutionally valid or number. We have held that the Act is companystitutionally valid.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 143 of 1957. Appeal from the judgment and order dated the 8th May, 1957, of the Allahabad High Court, in Criminal Reference No. 149 of 1956, arising out of the judgment and order dated the 14th January, 1956, of the First Additional Sessions Judge, Agra, in Sessions Trial No. 141 of 1954 and Criminal Misc. No. 1 of 1956. S. Pathak and Mohan Behari Lal, for the appellants. C. Mathur, C. P. Lal and G. N. Dikshit, for the respondent No. 1. Janardan Sharma, for respondent No. 2. 1959. September 14. The Judgment of the Court was delivered by WANCHOO J.-This is an appeal oil a certificate granted by the Allahabad High Court in a criminal matter. The facts of the case may be set out in some detail to bring out the point raised in this appeal. A companyplaint was filed by Rajendra Kumar Jain against the four appellants and three others under ss. 409, 465, 467, 471 and 477A of the Indian Penal Code. It is number necessary for present purposes to set out the details of the companyplaint. Suffice it to say that after the statement of the companyplainant under s. 200 of the Code of Criminal Procedure hereinafter referred to as the Code summonses were issued to the accused persons requiring them to answer a charge under s. 406 of the Penal Code. Prosecution witnesses were then examined and cross-examined and the statements of the accused persons recorded. The Magistrate then heard argu- ments on the question of framing of charges which were companycluded on September 23, 1954. It was then ordered that the case should be put up on September 30, 1954, for orders. On that date the Magistrate framed charges against the four appellants under ss. 409 and 465 read with s. 471 and 477A of the Penal Code. On the same date the Magistrate ordered companymitment of the four appellants to the Court of Session on these charges. The remaining three accused were discharged. There was then a revision petition by Rajendra Kumar Jain against the discharge of one of the three accused, namely, Bhajan Lal. When the matter came up before the First Additional Sessions Judge Agra, he ordered suo motu on April 9, 1955, after a perusal of the companymitment order that Bhajan Lal be companymitted to the Court of Session to stand his trial. In view of this order he dismissed the revision petition as infructuous. Thereupon Bhajan Lal went in revision to the High Court. That petition was heard by Roy, J., and he set aside the order of companymitment of Bhajan Lal and one of the reasons given by him for doing so was that a Magistrate was number empowered to frame a charge and make an order of companymitment until he had taken all such evidence as the accused might produce before him. As Bhajan Lal had number been called upon to produce evidence in defence the order of companymitment made by the Sessions Judge was held to be number in accordance with law. This order was passed on October 6, 1955. Thereupon on January 7, 1956, the four appellants filed a revision petition before the Sessions Judge praying that the order of companymitment passed against them be quashed and the main reason advanced in support of this petition was that the learned Magistrate had number observed the mandatory provisions of law laid down in ss. 208 to 213 of the Code which were essential for a valid companymitment. This petition came up before the same First Additional Sessions Judge and he made a reference to the High Court that as the procedure followed by the Magistrate was irregular the order of companymitment, dated September 30, 1954, was bad in law, and should be quashed. This reference came up for bearing before another learned Judge of the High Court, namely, Chowdhry, J., and he took the view that the Magistrate had number failed to companyply with the provisions of s. 208 and that number-compliance with the provisions of ss. 211 and 212 was curable under s. 537 of the Code. He, therefore, rejected the reference. There was then an application for a certificate to appeal to this Court which was allowed, particularly, as the view taken by Chowdhry, J., was in companyflict with the view taken by Roy, J., already referred to. The main companytention of the appellants before us is that as the case began before the Magistrate as a warrant case under s. 406 of the Penal Code, it was incumbent upon the Magistrate, when he decided, in view of the provisions of s. 347 1 of the Code, that the case should be companymitted to the Court of Session, to follow the procedure provided in Ch. XVIII of the Code and inasmuch as he had failed to companyply with ss. 208 to 213 of the Code the companymitment was bad in law and should be quashed. The first question that falls for companysideration, therefore, is whether the Magistrate when he began this case, was proceeding in the manner provided for the trial of warrant cases. Section 347 1 of the Code companyes into play when at any stage of the proceedings in any trial before a Magistrate, it appears to him that the ease ought to be tried by the Court of Session he has then to companymit the accused under the provisions herein before companytained. The Sessions Judge who made the reference held that the case before the Magistrate proceeded from the beginning as if it was a trial of a warrant case. It was on that basis that the Sessions Judge held that when the Magistrate made up his mind that the case ought to be companymitted to the Court of Sessions in view of the provisions of s. 347 1 of the Code it was his duty to observe the procedure laid down in Ch. XVIII, particularly, under ss. 208, 211 and 212 of the Code. The order of reference was sent to the Magistrate for explanation, if any, and the Magistrate replied that he had numberexplanation to submit. He did number say in his explanation that he was number proceeding as in a warrant case and that the proceedings before him throughout were proceedings in the nature of an inquiry under Ch. XVIII. When, however, the matter came up before the High Court, Chowdhry, J., was of opinion that though the Magistrate was companypetent to try the case as summonses has been issued under s. 406 1. P. C. only, it was open to him to hold an inquiry under Ch. XVIII from the very beginning in view of the provisions of s. 207 which empower a Magistrate to follow the procedure provided in Ch. XVIII in cases exclusively triable by a Court of Session and also in cases which are number exclusively triable by the Court of Session but which in the opinion of the Magistrate ought to be tried by such Court. The High Court was further of the view that the offence mentioned in the summons should be deemed to have given numberice to the accused that it was optional with the Magistrate to hold an inquiry with a view to companymit them to the Court of Session or to try them himself as in a warrant case because companyumn 8 of Schedule 11 of the Code says that a case under s. 406 is triable by a Court of Session, Presidency Magistrate or Magistrate of the first or second class. Therefore, according to the High Court the matter was at large whether the Magistrate was going to adopt one procedure or the other despite the issue of summonses under s. 406 of the Penal Code and that numberhing had happened to induce the belief in the accused that they would be tried as in a warrant case. The High Court, therefore, held that the case was proceeded with from the beginning as if it was an inquiry under Ch. XVIII and on that view it held that there was numbernon-compliance with s. 208 of the Code. As for number-compliance with ss. 211 and 213, the High Court was of the view that it was curable under s. 537 of the Code as numberprejudice was caused. We must say with respect that this view of the nature of the proceedings before the Magistrate is number companyrect. It is true that it is open to a Magistrate to hold an inquiry from the beginning under Chapter XVIII in a case number exclusively triable by the Court of Session. But the mere fact that the Magistrate has such power does number necessarily indicate to the accused that he is holding an inquiry under Ch. XVIII rather than a trial before himself. Where the case is number exclusively triable by the Court of Session, the accused would naturally companyclude that the proceedings before the Magistrate are in nature of a trial and number an inquiry under Ch. XVIII. If the Magistrate intends to use his powers under s. 207 and hold an inquiry from the beginning in a case number exclusively triable by the Court of Session, the only way in which the accused Can know that he is holding an inquiry and number a trial is by the Magistrate informing the accused that he is holding an inquiry under Ch. XVIII and number trial. If he fails to do so, the accused can reasonably companyclude that a trial is being held. In this case undoubtedly the Magistrate did number indicate to the accused from the beginning that his proceedings were in the nature of an inquiry under Ch. XVIII. Therefore the accused would naturally companyclude that the proceedings before him were in the nature of a trial of a warrant case as the summonses that they had received were under s. 406 of the Penal Code only. The fact that in the companyplaint s. 467, which is exclusively triable by a Court of Session, was mentioned is of numberconsequence for the summonses. to the accused were only for a trial under s. 406 of the Penal Code. It must, therefore, be held that the proceedings before the Magistrate began as in the trial of a warrant case and if the Magistrate at a subsequent stage of the proceedings was of the view that the case should be companymitted to the Court of Session, he would have to act under s. 347 1 of the Code. We have been at pains to refer to this aspect of the matter for companysiderations would be different if the case was exclusively triable by the Court of Session and began from the outset as an inquiry under Ch. XVIII. What we shall say hereafter must, therefore, be taken to apply only to a case which began as a proceeding in a warrant or summons case and in which the Magistrate at a later stage takes action under s. 347 1 . This brings us to a companysideration of the duty of the Magistrate who takes action under s. 347 1 of the Code. That section reads as follows- If in any inquiry before a Magistrate or in any trial before a Magistrate, before signing judgment, it appears to him at any stage of the proceedings that the case is one which ought to be tried by the Court of Session or High Court, and if he his empowered to companymit for trial, he shall companymit the accused under the provisions hereinbefore companytained. The first question that has to be decided is the meaning of the words under the provisions hereinbefore companytained . These words have been the subject of decision by a number of High Courts and the High Courts are unanimous that they mean that if the Magistrate decides at some stage of the trial to companymit the accused, he has to follow the provisions companytained in Ch. XVIII. It is number necessary to refer to those decisions for the words themselves are quite clear. They lay down that if the Magistrate companyes to the companyclusion that the accused ought to be companymitted for trial, he shall companymit in accordance with the provisions companytained in the earlier part of the Code, namely, in Ch. XVIII. This of companyrse does number mean that the Magistrate must begin over again from the beginning. All that he has to do when he decides that the case ought to be companymitted is to inform the accused and see that the provisions of Ch. XVIII are companyplied with so far as they have number been companyplied with up to the stage at which he decides that there ought to be a companymitment. Now the procedure under, Ch. XVIII is laid down in ss. 208 to 213 of the Code. The Magistrate begins by hearing the companyplainant, if any, and takes all evidence that may be produced in support of the prosecution or on behalf of the accused or as the Magistrate may call himself. The Magistrate is also required to issue process to companypel the attendance of any witness or the production of any document or other thing if the companyplainant or officer companyducting the prosecution of the accused applies to him. After the evidence under s. 208 has been taken the Magistrate then examines the accused for the purpose of enabling him to explain any circumstances appearing in evidence against him under s. 209. Thereafter if he is of opinion that there are number sufficient grounds for companymitting the accused for trial, lie can discharge him unless it appears to him that such person should be tried before himself or some other Magistrate in which case he has to proceed accordingly. On the other hand, if the Magistrate is of opinion after taking the evidence and examining the accused that there are sufficient grounds for companymitting the accused for trial, he has to frame a charge under s. 210 declaring with what offence the accused is charged. The charge is then read over and explained to the accused and a companyy thereof, if he so requires, is furnished to him free of companyt. After the charge is framed the Magistrate calls upon the accused under s. 211 to furnish a list of persons orally or in writing whom he wishes to be summoned to give evidence on his trial. The Magistrate may also allow the accused to furnish a further list at a later stage in his discretion. Section 212 gives power to the Magistrate in his discretion to summon and examine any witness named in any list under s. Then companyes s. 213 which lays down that if the accused has refused to give a list as required by s. 211 or if he has given one and the witnesses, if any, included therein whom the Magistrate desires to examine, have been summoned and examined under s. 212 the Magistrate may make an order companymitting the accused for trial by the High Court or the Court of Session and shall also briefly record the reasons for such companymitment. On the other hand, if he is satisfied after hearing the witnesses for the defence that there are number sufficient grounds for companymitting the accused, he may cancel the charge and discharge the accused. It will be seen from this analysis of the provisions relating to companymitment that s. 208 gives a right to the accused to produce evidence in defence before the Magistrate examines him under s. 209 and proceeds to frame a charge under s. 210. Now when a Magistrate makes up his mind to companymit a case number exclusively triable by the Court of Session under -the power given to him under s. 347 1 of the Code, he has to follow this procedure. But as we have said earlier it is number necessary that the Magistrate should begin from the beginning again when he so makes up his mind. The Magistrate may make up his mind at any stage of the trial before him and generally speaking four companytingencies may arise. Firstly, he may make up his mind after the trial is practically over and the witnesses for the prosecution have been examined and crossexamined after the charge, the accused has be-en examined both under ss. 253 and 342 of the Code and and all the defence evidence has been taken. In such a case ss. 208, 209 and 210 have been companyplied with and all that the Magistrate has to do is to intimate to the accused that he intends to companymit him for trial and ask him to give the list of witnesses under s. 211 and proceed thereafter as provided in Ch. XVIII. Secondly, the Magistrate may make up his mind after all the witnesses for the prosecution have been examined and cross-examined and the charge has been framed but numberdefence has been taken. In such a case that part of s. 208 which lays down that all the evidence for the prosecution shall be taken, has been companyplied with and the Magistrate may then proceed to companyply with the rest of section 208 and take the defence evidence and then proceed further under ss. 209 to 213 and amend the charge so as to make it companyformable to a charge in an inquiry under Ch. XVIII or cancel it. Thirdly, the Magistrate may make up his mind after some of the prosecution witnesses have been examined and cross-examined and a charge has been framed. In such a case he has to examine the rest of the prosecution witnesses under s. 208 and take the defence evidence, if any, produced by the accused and then proceed under ss. 209 to 213 amending or cancelling the charge already framed as indicated earlier. Lastly, the Magistrate may have only just begun taking evidence for the prosecution and may number have framed a charge. In such a case he takes the rest of the prosecution evidence and companyplies with the provisions from ss. 208 to 213. But in each of these four companytingencies it is the duty of the Magistrate to intimate to the accused that he has made up his mind to companymit in view of the provisions of s. 347 1 and then proceed in the manner indicated above. It is necessary that the accused should know when the Magistrate makes up his mind to companymit so that their right under s. 208 to produce defence, if any, before companymitment is made is safeguarded. Now what happened in this case was this. The Magistrate had apparently taken all the prosecution evidence and the prosecution witnesses had been examined and cross-examined the Magistrate had framed numbercharges upto September 30, 1954. He had heard arguments on the question whether any charges should be framed and had fixed September 30,1954, for orders in this respect. When, therefore, he decided on September 30,1954, that the case ought to be companymitted to the Court of Session, the proper companyrse for him was to refrain from framing any charges and intimate to the accused that he intended to companymit them for trial. He then should have called upon them to produce defence evidence, if any, under s. 208 and then proceeded further under Ch. XVIII. The Magistrate, however, failed to inform the accused that -he had made up his mind to proceed under s. 347 1 and to companymit them for trial. What he did on September 30, 1954, was to frame charges forthwith and record an order companymitting the accused to the Court of Session under s. 213 of the-Code. He thus deprived them of their right to lead defence evidence, if any, under s. 208. It may be that if he had told them that he was going to proceed under s. 347 1 and companymit them for trial and asked them if there was any defence evidence to be produced, they might have said that they did number wish to produce any defence before him at that stage. But what the accused would have said if the Magistrate had proceeded in this manner is irrelevant in companysidering the question whether the companymitment in this case was bad in law inasmuch as it did number companyply with s. 208 so far as giving the accused an opportunity to lead defence evidence, if any, was companycerned. The fact remains, therefore, that in this case the Magistrate when he decided to act under s. 347 1 did number intimate that decision to the accused and proceeded forthwith to companymit them for trial under s. 213, thus depriving them of the right to produce defence evidence, if any, under s. 208. The next question which falls for companysideration is the effect of this number-compliance with s. 208 of the Code and whether it is curable under s. 537 of the Code. The effect of Don-compliance with various provisions of the Code and whether such number-compliance is curable under s. 537 have -been the subject of a large number of cases before various High Courts and also before their Lordships of the Judicial Committee of the Privy Council. It is number necessary to refer to this mass of authorities. One of the earliest of these case decided by the Privy Council is Subramania Iyer King-Emperor 1 , while one of the latest is Pulukuri Kotayya v. King-Emperor 2 . The law was summed up by their Lordships of the Judicial Committee in Pulukuri Kotayyas case 2 at p. 75 in these words When a trial is companyducted in a maner different from that prescribed by the Code as in N.A. Subramania Iyers case 1 , the trial is bad, and numberquestion of curing an irregularity arises but if the trial is companyducted substantially in the manner prescribed by the Code, but some irregularity occurs in the companyrse of such companyduct, the irregularity can be cured under s. 537, and numbere the less so because the irregularity involves as must nearly always be the case, a breach of one or more of the very companyprehensive provisions of the companye. The distinction 1 1901 L.R. 28 I.A. 257. 2 1948 L.R. 74 I.A. 65. drawn in many of the cases in India between an illegality and an irregularity is one of degree rather than of kind. This view finds support in the decision of their Lordships Board in Abdul Rehman v. The King-Emperor 1 where failure to companyply with ss. 360 of the Code of Criminal Procedure was held to be cured by s. 535 and 537. These observations were quoted with approval by this Court in Narain Rao v. The State of Andhra Pradesh 2 . It seems, therefore, fruitless to companysider whether the number-compliance with s. 208 in this case is an illegality which cannot be cured under s. 537 or an irregularity which is curable thereunder. As the stage of trial has number been reached in this case, numberquestion arises of companysidering whether the trial has been companyducted in a manner different from that prescribed by the Code. What we have to see is whether the breach of s. 208 which has occurred in this case is such that the Court will presume prejudice to the accused by the mere fact of the breach. If such presumption can be made, the breach would obviously be number curable under s. 537 of the Code, even assuming that that section applies. The question, therefore which eventually emerges is whether this breach of s. 208 is of such a character that the Court will presume that there has been prejudice to the accused by the mere fact of the breach. Now the accused has a right under s. 208 to produce evidence in defence, if any, before the Magistrate proceeds to decide whether a charge should be framed or number. The Magistrates decision whether the charge should be framed or number is bound to be affected one way or the other if evidence is produced by the accused, for the Magistrate Would then be bound to companysider the effect of that evidence on the question of framing the charge. If the accused is denied the opportunity of leading that evidence which he has a right to do under s. 208, it seems to us that the denial of such right is sufficient to cause prejudice to the accused and s. 537 would have numberapplication to a case of this kind. The possibility that the accused may number have produced defence if asked by the Magistrate whether he would do so, 1 1926 L.R. 54 I.A. 96, 2 1958 S.C.R. 283. is of numberconsequence, so far as this companyclusion is companycerned. If this is the reply expected, it makes it all the more incumbent on the Magistrate to inform the accused that he was intending to companymit the case and ask him if he wished to produce evidence. If the accused did number want to do so, the Magistrate would have done his duty and his way would be clear to proceed further with his intention to companymit the accused. But when the Magistrate did number intimate to the appellants in this case that he was intending to companymit them for trial and proceeded to frame charges and pass the order of companymitment forthwith on September 30, he was denying to them their right to produce defence under s. 208 of the Code. The denial of that right is in our opinion in itself sufficient to cause prejudice to the accused and failure of justice inasmuch as the accused were prevented from leading evidence which might have induced the Magistrate number to frame a charge against them or cancel it. We are, therefore, of opinion that the breach of s. 208 which took place in this case was such as was bound to cause a failure of justice and there is, therefore, numberquestion of the application of s. 537 in these circumstances. The companymitment is, therefore, bad in law and must be quashed on this ground alone. In the petition of appeal the appellants have referred also to breach of provisions of ss. 211, 212 and 213 of the Code. As we have companye to the companyclusion that the breach of s. 208 in this case is sufficient to invalidate the companymitment it is number necessary to companysider the effect of the further breach of ss. 211, 212 and 213. What we have said in this case wit respect to the effect of the breach of s. 208 may number be taken as applying to the breach of ss. 211, 212 and 213 for the companysiderations arising out of those breaches may be different.

Case appeal was accepted by the Supreme Court

An allowable deduction under the said proviso was number the same thing as exclusion of a part of the turn-over on the basis of s. 33 1 a 1 of the Act. It stands on an entirely different footing. Transactions which fall within the said section are in substance outside the Act and numbertax can be imposed on them. The transaction in question did number, therefore, fall within the proviso to r.19 and the proviso to S. 14A was number attracted and the order of forfeiture passed against the respondent was unjustified and illegal. CIVIL APPELLATE JURISDICTION Civil Appeal No.678 of 1957. Appeal from the judgment and order dated August 1, 1956-of the Patna High Court, in Misc. Judicial Case No. 188 of 1955. WITH Civil Appeals Nos. 546 of 1958 and 115 of 1959. Appeals from the judgment and order dated March 8, 1957, of the Patna High Court, in Misc. Judicial Cases Nos. 116 and 215 of 1956. Lal Narayan Sinha and S. P. Varma, for the appellant. K. Daphtary, Solicitor-General of India and R. C. Prasad, for respondent No. 1 in C. A. No. 678 of 57. C Ghose and P. K. Chatterjee, for the intervener. N. Sanyal, Additional Solicitor-General of India and C. Lal, for respondent No. 1 in C.A. No. 546 of 58. N. Sanyal, Additional Solicitor-General of India and P. Chatterjee, for respondent No. 1 in C.A. No. 115 of 1959. 1959. November 26. The Judgment of the Court was delivered by GAJENDRAGADKAR J.-This is a group of three appeals which have been filed in this Court by the State of Bihar hereinafter called the appellant against three separate registered dealers with a certificate issued by the Patna High Court Under Art. 132 1 of of the Constitution that they involve a substantial question of law as to the interpretation of Art. 20 1 of the Constitution. The facts in each one of the three appeals are similar, though number exactly the same, but they raise a companymon question of law under the proviso to s. 14A of the Bihar Sales Tax Act, 1947 Act XIX of 1947 hereinafter called the-Act . Orders of forfeiture have been passed against the three registered dealers in the three appeals respectively, and they raise a companymon question of law in regard to the validity of the said orders. By companysent Civil Appeal No. 678 of 1957, has been argued before us as the principal appeal and it has been companyceded that our decision in that appeal will govern the two other appeals. We would,, therefore, set out the facts in Civil Appeal No, 678 of 1957 and deal with the merits of the points raised for our decision in that appeal. Rai Bahadur Hurdut Roy Motilal Jute Mills, Katihar hereinafter called the first respondent was at the, material time registered as a dealer under the Act and was carrying oil business of manufacture and sale of gunny bags, Hessian and other jute products at Katihar in the district of Purnea. During the period April 1, 1950, to March 31, 195 1, the said respondent sold and despatched its ware worth about Rs. 92,24,386 to dealers outside the State of Bihar and realised a sum of Rs. 2,11,222-9-6 as sales tax from such dealers. The said respondents assessment to sales tax for the relevant period was taken up by the Superintendent of Sales Tax, Purnea hereinafter called the second respondent on May 31, 1953 and in companysequence of these proceedings the impugned order of forfeiture came to be passed. Meanwhile Art. 286 of the Constitution along with other articles was companysidered by this Court in the State of Bombay Anr. v. The United Motors India Ltd. Ors. 1 . The question which this Court bad to companysider in that case was about the vires of the impugned provisions of the Bombay Sales Tax Act, 1952 Act XXIV of 1952 , and for the decision of the said question Art. 286 fell to be Considered. According to the majority judgment in that case Art. 286 1 a read with the explanation thereto and companystrued in the light of Art. 301 and Art. 304 prohibits the taxation of sales or purchases involving inter-State elements by all States except the State in which the goods are delivered for the purpose of companysumption therein. The latter State is left free to tax such sales or purchases and it derives this power number by virtue of the explanation to Art. 286 1 but under Art. 243 3 read with Entry 54 of List 11. The view that the explanation does number deprive the State in which the property in the goods passed of its taxing power and that companysequently both the State in which the property in -the goods passes and the State in which the goods are delivered for companysumption have the power to tax is number companyrect. When the first respondents assessment was taken up by the second respondent his attention was invited to this Courts decision in the case of the United Motors 1 he followed the said decision and held that 1 1953 S.C.R. 1069. the turn over of Rs. 92,24,386-1-6 on account of despatch of manufactured jute products to out-of-Stat buyers was exempted from the levy of tax this meant, a deduction of the said amount from the amount of Rai Bahadur the total turnover shown by the first respondent in the return submitted by him according to the provisions of the Act. Subsequently the second respondent proceeded against the first respondent under s. 14A of the Act and issued a numberice in that behalf on June 18, 1954. By this numberice the first respondent was called upon to show cause why the entire amount of Rs. 2,11,222-9-6 which had been recovered by him as sales tax from the dealers should number be forfeited to Government. The first respondent showed cause but the second respondent was number satisfied with the explanation given by the first respondent, and so he directed the first respondent to deposit the said amount into the Government treasury and produce the proof of payment before him within a month of the receipt of his order. This order was passed on February 10, 1955. It shows that the second respondent thought that the matter raised for his decision was simple the first respondent had companylected the amount in question as tax under the Act from his customers for and on behalf of the appellant, and so he companyld number retain the said amount it must go to the State companyfers. He also held that the first respondent had represented to the, purchasers that the amount was chargeable as sales tax under the Act and as such the first respondent had clearly companytravened the explicit provisions of s. 14A of the Act read with r. 19 of the Bihar Sales Tax Rules hereinafter called the Rules . It is on these findings that the second respondent passed the impugned order of forfeiture. The first respondent then applied to the Patna High Court, tinder Arts. 226 and 227 of the Constitution challenging the validity of the said order. It was urged on his behalf that the proviso to s. 14A under which the impugned order was purported to have been passed did number apply to the case of the first respondent, and as such the order was Dot justified by the said proviso. It was also companytended that if it is held that the said proviso justified the impugned order it was ultra vires the State Legislature inasmuch as it violates Art. 20 1 and Art. 31 2 of the Constitution. The High Court did number companysider the first companytention raised before it it dealt with the two companystitutional points urged by the first respondent and found in his favour on both of them. On these findings the petition filed by the first respondent was allowed, the impugned order of forfeiture was set aside and the proceedings taken against the first respondent under s. 14A were quashed. The appellant then applied for and obtained a certificate from the said High Court under Art. 132 1 of the Constitution. On behalf of the appellant Mr. Lal Narain Sinha has companytended that the High Court was in error in holding that the proviso to s. 14A violates either Art. 20 1 or Art. 31 2 of the Constitution. He has addressed us at length in support of his case that neither of the two articles is violated by the impuged proviso. On the other hand, the learned SolicitorGeneral has sought to support the findings of the High Court on the said two companystitutional points and he has pressed before us as a preliminary point his argument that on a fair and reasonable companystruction, the proviso cannot be applied to the case of the first respondent. We would, therefore, first deal with this preliminary point. In cases where the vires of statutory provisions are challenged on companystitutional grounds, it is essential that the material facts should first be clarified and ascertained with a view to determine whether the impugned statutory provisions are attracted if they are, the companystitutional challenge to their validity must be examined and decided. If, however, the facts admitted or proved do number attract the impugned provisions there is numberoccasion to decide the issue about the vires of the said provisions. Any decision on the said question would in such a case be purely academic. Courts are and should be reluctant to decide companystitutional points merely as matters of academic importance. Before companysidering the preliminary point raised by the first respondent it is necessary to refer briefly the relevant scheme of the Act. The Act was originally passed in 1947 because the Legislature thought it necessary to make an addition to the revenue of Bihar, and for that purpose to impose a tax on the sale of goods in Bihar. The provisions of the Act as well as the statutory Rules framed under it have been subsequently modified from time to time. In our present discussions we would refer to the provisions and the Rules which were in operation at the material time. The goods the sale of which is taxed under the Act are defined by s. 2 d as meaning all kinds of moveable property other than those specifically excepted. Section 2 g defines sale inter alia as meaning any transfer of property in goods for cash or other companysiderations and the second proviso to it prescribes that the sale of any goods- 1 which are actually in Bihar at the time when, in respect thereof the companytract of sale as defined in s. 4 of that Act is made, or 2 which are produced or manufactured in Bihar by the producer or manufacturer thereof,-shall wherever the delivery or companytract of sale is made, be deemed for the purposes of this Act to have taken place in Bihar. The tax leviable Linder the Act is defined by s. 2 hh as including a fee fixed in lieu of the tax under the first proviso to s. 5, whereas under s. 2 i turnover means the aggregate of the amounts of sale prices received and receivable by a dealer in respect of sale or supply of goods or carrying out of any companytract, effected or made during the given period, or, where the amount of turnover is determined in the prescribed manner, the amount so determined. Section 4 which is the charging section provides that every dealer whose gross turnover during the specified period on sales which have taken place both in and outside Bihar exceeds Rs. 10,000 shall be liable to pay tax on sales which have taken place in Bihar oil and from the date of the companymencement of the Act. This section shows that the incidence of taxation can be attracted only where the gross turnover of the dealer exceeds Rs. 10,000 and in determining this prescribed minimum. sales which take place both in Bihar and outside are taken into account. Section 5, prescribes the rate of tax at six pies in a rupee on the taxable turnover. The provisos to this section companyfer specific powers on the State Government the first proviso which is relevant for our purpose empowers the State Government by numberification to fix a higher rate of tax number exceeding one anna in a rupee or any lower rate of tax in respect of sale of any goods or class of goods specified in such numberification subject to such companyditions as it may impose. The explanation to this section indicates what the taxable turnover for the purpose of the section means. Taxable turnover according to this explanation means that part of a dealers gross turnover on sales which have taken place in Bihar during any period which remains after deducting therefrom the items specified in cls. a and b of the explanation. The sale of any goods declared from time to time as tax-free goods under s. 6 is one of those items. Section 6 empowers the State Government to exempt sale of any goods or class of goods from the levy of tax under this Act subject to the companyditions specified in the section, whereas s. 7 empowers the Government to exempt dealers from tax, and s. 8 authorises the Government to prescribe points at which goods may be taxed or exempted. Section 9 deals with the question of registration of dealers and provides that numberdealer who is liable to pay tax under s. 4 shall carry on business unless he has been registered under the Act and possesses a registration certificate. Under s. 11 a list of registered dealers is published, and by s. 12 such registered dealers are required to furnish such returns by such dates and to such authorities as may be prescribed. Section 13 prescribes the procedure for assessment, and s. 14 requires that the tax payable under the Act shall be paid in the manner hereinafter provided at such intervals as may be prescribed. Section 14 2 requires the registered dealer to pay into a Government treasury the full amount of tax due from him according to the returns which he has to file and has to furnish along with the said return a receipt from the treasury showing the payment of such amount. Having thus provided for the recovery of the tax charged under s. 4, s. 14A in effect authorises registered dealers to reimburse their dues by making companylections of the tax payable by them in accordance with the restrictions and companyditions as may be prescribed. It provides that numberdealer who is number a registered dealer shall realise any amount by way of tax on sale of goods from purchasers number shall any registered dealer make any companylection of tax except in accordance with such restrictions and companyditions as may be prescribed. That takes us to the proviso to s. 14A with which we are directly companycerned in the present appeal. It reads thus Provided that if any dealer companylects any amount by way of tax, in companytravention of the provision of this section or the companyditions and restrictions prescribed thereunder, the amount so companylected shall, without prejudice to any punishment to which the dealer may be liable for an offence under this Act, be forfeited to the State Government and such dealer shall pay such amount into the Government treasury in accordance with a direction issued to him by the Commissioner or any officer appointed under section 3 to assist him and in default of such payment, the amount shall be recovered as an arrear of land revenue. The effect of this proviso is clear. A dealer is authorised to companylect amounts by way of tax from the purchasers only in accordance with the provision of s. 14A and the companyditions and restrictions prescribed thereunder. The companyditions and restrictions referred to in the proviso are to be found in the material Rules framed under the Act. If it is shown that a dealer has companylected an amount by way of tax in violation of the companyditions and restrictions prescribed by the Rules he incurs the penalty of forfeiture as specified in the proviso. There can be numberdoubt that before the penalty of forfeiture can be imposed upon the dealer under the proviso it must be shown that he has acted companytrary to the companyditions and restrictions prescribed by the Rules. It would number be enough to show that the companylection of the amounts in question by the dealer is otherwise illegal or improper. The companytravention of the statutory provision companytained in s. 14A or of the Rules prescribing companyditions and restrictions in that behalf alone can form the basis of the imposition of the penalty under the proviso. This position is number disputed before us. The appellant companytends that the proviso is attracted to the present case because the first respondent has companytravened the companyditions and restrictions imposed by the proviso to r. 19, whereas the first respondent argues that a proper companystruction of this latter proviso does number justify the appellants plea. It would thus- be seen that the decision of the preliminary point raised by the first respondent involves the narrow question of the companystruction of the proviso to r. 19. Before companystruing the said proviso it is, however, necessary to refer to s. 33 of the Act. This section was enacted on April 4,1951, but it has been expressly made retrospective as from January 26, 1950. Therefore at the material time this section must be deemed to have been in operation. Section33 1 a i provides that numberwithstanding anything companytained in the Act a tax on the sale or purchase of goods shall number be imposed under the Act where such a sale or purchase takes place outside the State of Bihar. Section 33 2 makes the explanation to cl. 1 of Art. 286 of the Constitution applicable for the interpretation of subcl. i of cl. a of sub-s. 1 . It is companymon ground that if the relevant provision just cited is companystrued in the light of the decision of this Court in the case of the United Motors 1 there can be numberdoubt that the sales which are the subject-matter of the present proceedings companysist of transactions on which a tax cannot be imposed under the Act. That is why the appellant strongly relies on this provision and companytends that in companystruing the proviso to r. 19 the true legal position in respect of the transactions in question must be borne in mind. Let us number read the proviso to r. 19. Rule 19 itself prescribes the procedure which has to be followed by 1 1953 S.C.R. 1069. a registered dealer in realising any amount by way of tax on sale of goods from purchasers. This procedure refers to the issue of a cash memo or a bill as prescribed by it. The proviso to this Rule lays down that numbersuch registered dealer shall realise any amount by way of tax at a rate higher than the rate, at which he is liable to pay tax under the Act, or realise any amount by way of tax in respect of such part of his turnover as is allowed to be deducted from his gross turnover for the determination of his taxable turnover under the Act or these Rules. The appellant relies on the latter part of the proviso and argues that the part of the turnover of the first respondent which is in question fell within s. 33 1 a 1 and as such was number liable to be taxed. That being so there was numberjustification for the first respondent to companylect any amount by way of tax from his purchasers under s. 14A. The scheme of S. 14A is to permit the registered dealer to companylect such amounts of tax from his purchasers as he in his turn is liable to pay to the appellant. Authority to companylect such tax amounts given to the registered dealer inevitably postulates his liability to pay a similar amount to the appellant. Therefore the companyduct of the first respondent in companylecting amounts by way of tax from his purchasers amounts to a breach of s. 14A itself. It is also companytended that having regard to the -provisions of s. 33 1 a i the first respondent was entitled to claim a deduction of the transations in question from his gross turnover under the latter part of the proviso, and that clearly means the first part of the said proviso applies to his case and it prohibited him from realising the said amounts. His companyduct in companylecting the amounts, therefore, companystitutes a breach of the companyditions specified in the proviso to r. 19. In appreciating the validity of these arguments it would be relevant to remember that at the material time there was companysiderable companyfusion in the minds of the public as well as the State authorities about the true scope and effect of the provisions of Art. 286 1 of the Constitution. It is number disputed that during the material period and in the years preceding it registered dealers used to pay tax in respect of transactions which were really number liable to be taxed under s. 33 1 a i and such tax was being received by the appellant. In fact, as we have already pointed out s. 14 of the Act imposes a liability on the registered dealer to furnish along with his return a receipt for the payment of the tax which is payable under the return. Such payments were made by registered dealers in respect of similar transactions and were accepted. It is an accident that the assessment proceedings of the first respondent were actually taken up for decision by the second respondent after the decision of this Court in the case of the United Motors 1 . If the question about the first respondents liability to pay the tax under the Act had been decided before the date of the said decision there is numberdoubt that he would have been required to pay the tax for the transactions in question. Indeed it is companymon ground that the numberification issued for the material period levied a tax at three pies on the goods in question if the sales tax authority is satisfied that the goods have been despatched by or on behalf of the dealer to any person outside the Province of Bihar. This numberification is companysistent with the definition of the word sale as it then stood. It is thus clear that at the material time the appellant thought that transactions like those in question in the present appeal were liable to pay the tax at the rate of three pies as prescribed by the relevant numberification the registered dealers also had numberdoubt on the point and so taxes were companylected in respect of such transactions by the appellant from the registered dealers and by the registered dealers in their turn from their purchasers. Nevertheless, after the enactment of s. 33 the legal fiction about the retrospective operation of the said section must be given effect to and in companystruing the proviso to r. 19 it must be assumed that the transactions in question were outside the scope of the Act and numbertax companyld have been imposed in respect of them. Construing the proviso on this assumption, can it be said that in respect of the part of the first respondents 1 1953 S.C.R. 1069. turnover which is in question a deduction was allowable within the meaning of the proviso? In our opinion this question cannot be answered in favour of the appellant. Rule 19 itself was framed in 1949 and has number been amended subsequent to the enactment of s. 33. As it was framed its reference to the allowable deductions was clearly based on the provisions of ss. 6, 7 and 8 of the Act. This position would be clear beyond all doubt if we read the material words in the proviso in the light of the explanation to s. 5 of the Act. The explanation in terms enumerates deductions which have to be made in determining the taxable turnover of the registered dealer and it is to these deductions which are allowable under the three sections specified in the explanation to which the latter part of the proviso to r. 19 refers. A claim for the exclusion of a part of the first respondents turnover on the strength of s. 33 1 a i cannot, therefore, be said to be an allowable deduction under the proviso. This question can be companysidered from another point of view. The provisions which allow deductions to be made or grant exemptions in respect of certain transactions obviously postulate that but for them the transactions in question would be liable to. tax under the Act and so when such transactions are included in the return the registered dealer is allowed to claim appropriate deductions in respect of them. But, the position with regard to s. 33 is entirely different transactions which attract the provisions of the said section are in substance outside the scope of the Act and numbertax can be imposed on them at all. If that be the true position the claim which can be made by the registered dealer in respect of such transactions cannot in law be regarded as a claim for allowable deductions or exemptions properly so-called it is really a claim that the Act itself does number apply to the said transactions. Therefore, in our opinion it would be straining the language of the second part of the proviso to r. 19 to hold that the transactions in question fell within its purview. There is one more point to be companysidered in this companynection. Form VI which has been prescribed for making the returns under s. 12 requires the gross turnover to be mentioned at the outset, and then it provides for the different deductions allowable under the Act. This form was prescribed in 1949 and has number been amended after the addition of s. 33 to the Act. On looking at this form it seems difficult to entertain the argument that the claim for the total exclusion of the transactions in question can be made under any of the headings prescribed in the form. The appellant, however, companytends that the first item of gross turnover means the whole of the gross turnover which must include all sale transactions whether they took place within Bihar or outside it, and in support of this argument reliance is placed on the definition of turnover companytained in s. 2 1 . If the whole of the gross turnover has to be mentioned under item 1, it is urged, the claim for the exclusion of the transactions in question can well be adjusted under one or the other of the deduction items prescribed in the form. We are number inclined to accept this argument. The form as it has been prescribed companystrued in the light of the material provisions companytained in ss. 6, 7 and 8 does number support the case that in prescribing its several items it was intended that the transactions failing under s. 33 should be first shown under item 1 and then excluded under one or the other of the remaining items of deduction. Besides it may be relevant to point out that the heading of Chapter VII which deals with the submission of returns by dealers is return of taxable turnover and it is arguable that the gross turnover mentioned in Form VI may mean gross taxable turnover and number the gross turnover including the transactions which are outside the scope of the Act. Then as to the argument about the companytravention of s. 14A itself it is difficult to appreciate how any provision of s. 14A can be said to have been companytravened. Section 14A companysists of two parts both of which are put in a negative form. The second part with which we are companycerned in effect means numberhing more than this, that a registered dealer can make companylections of such tax only as is payable by him in accordance with the restrictions and companyditions as may be prescribed. If the argument is that the first respondent was number liable to pay any tax and as such was number entitled to make any companyresponding companylection, then the companylection made by him may fall outside s. 14A and be otherwise unjustified or improper but it does number amount to the companytravention of any provision of s. 14A as such. In fact s. 14A itself refers to the restrictions and companyditions which may be prescribed and, as we have already seen, these companyditions and restrictions are prescribed by the Rules in general and by r. 19 in particular. So the argument urged under s. 14A takes us back to the question as to whether the proviso to r. 19 has been companytravened. In dealing with this question we cannot ignore the fact that the relevant provisions which fall to be companystrued in the present appeal impose a serious penalty on the registered dealer, and so, even if the view for which the appellant companytends may perhaps be a possible view, we see numberreason why the other view for which the first respondent companytends and which appears to us to be more reasonable should number be accepted. In the result we hold that the proviso to s. 14A cannot be invoked against the first respondent and so the order of forfeiture passed against him by the second respondent is unjustified and illegal. In view of this companyclusion it is unnecessary to companysider the objections raised by the first respondent against the validity of the proviso on the ground that it companytravenes Arts. 20 1 and 31 2 of the Constitution. We may incidentally add that during the companyrse of the arguments before us we have also heard all the learned companynsel on the question as to whether the said proviso companytravenes the provisions of Art. 19 1 f as well. The result is the appeal fails and is dismissed with companyts. The decision of this appeal governs Civil Appeals Nos. 546 of 1958 and 115 of 1959.

Case appeal was rejected by the Supreme Court

ORIGINAL JURISDICTION Petition No. 126 of 1958. Petition under Article 32 of the Constitution of India, for enforcement of Fundamental Rights. C. Chatterjee and B. V. S. Mani, for the petitioners. Sen and R. H. Dhebar, for the respondent. 1959. November 20. The Judgment of the Court was delivered by DAS GUPTA J.-The petitioners who describe them- selves as Road-side Station Masters challenge in this petition under Art. 32 of the Constitution the companystitutionality of the channel of promotion for Guards to higher grade Station Masters posts as numberified in the issue of the Central Railway Weekly Gazette No. 3 dated November 23, 1951. Under this Notification Guards have two lines of promotion open to them. One is that by promotion, C grade Guards may become B grade Guards on Rs. 100-185 and thereafter by further promotion A grade Guaids on Rs. 150-225. The second line of promotion open to them is that by an examination described curiously enough as Slip 45 examination C grade Guards are eligible for promotion to posts of Station Masters on RS. 150-225 scale and thereafter to all the further promotions that are open to the Station Masters, viz., higher ,cales of Rs. 200 to Rs. 300, Rs. 260 to Rs. 350, Rs. 300 to Rs. 400 and finally Rs. 360 to Rs. 500 B grade Guards and A grade Guards are also on passing Slip 45 examination eligible for promotion to posts of Station Masters on Rs. 200-300 pay scale and thereafter to further promotions to the higher scales in the Station Masters line. The Road side Station Masters on pay scale of Rs. 80 to Rs. 170 the scale was formerly Rs. 64-170 can also reach by promotion the grade of Rs. 150-225 but only after going through an intermediate stage of Rs. 100-185. Similarly Station Masters on Rs. 100-185 scale may also reach the stage of Rs. 200-300 but only after passing through the intermediate stage of Rs. 150-225. Obviously the provisions enabling Guards to become Station Masters on the pay scale of Rs. 150-225 places the Station Masters of Rs. 80-170 scale at a disadvantage as against Guards on that pay scale and also puts the Road-side Station Masters on the pay of Rs. 100-185 pay scale at a disadvantage as against Guards on that scale of pay. The petitioners companytend that the channel of promotion in so far as it enables Guards to be promoted as Station Masters in addition to the other line of promotion open to them as Guards amounts to a denial of equal opportunity as between Road-side Station Masters and Guards in the matter of promotion and thus companytravenes the provisions of Art. 16 1 of the Constitution. It was further alleged in the petition that taking advantage of this channel of promotion, Guards become Station Masters on Rs. 150-225 at a very much younger age than Road-side Station Masters and thus block the chances of higher promotion to Road-side Station Masters who reach the Rs. 150-225 scale when they are much older. As instances of how the impugned provisions in the channel of promotion are harmful to the Road-side Station Masters, the petitioners state that while the petitioner No. 2 even after companypleting 32 years of service has remained in the grade of Rs. 100-185 as Station Master, Guards of equal status and standing have reached gazetted rank within the same period of service that whereas the petitioner No, 3 has companye by promotion to the grade of Rs. 150225 after putting in 21 years of service, Guards of his standing have risen to the grade of Rs. 360-500 by virtue of the impugned channel of promotion and several of his juniors who entered the Railway service long after him as Guards have superseded him and are working in the grade of Rs. 360-500 that while the petitioner No. 4 having entered into service as Telegraph Candidate and having passed all the requisite examinations prescribed for the higher grade of Station Master within a period of 2 1/2 years after putting in 6 1/2 years of service is still in the grade of Rs. 80-170, Guards of his length of service and departmental qualification are entitled for promotion as an Assistant Station Master in the grade of Rs. 150-225 within about the same length of service. The respondents-the General Manager, Central Railways, Bombay, V.T., the Chairman Railway Board, New Delhi and the Union of India,-who companytest the application companytend that the channel of promotion providing these opportunities to Guards does number in any way companytravene the provisions of Art. 16 1 of the Constitution. They also deny the companyrectness of the allegation that as a result of these opportunities Guards become Station Masters on Rs. 150-225 pay scale at a Younger age than Road-side Station Masters. On the material before us it is number possible to companye to a firm companyclusion as regards the relative age at which Guards or Road-side Station Masters ordinarily reach the pay scale of Rs. 150-225. Assuming, however, the position to be as stated in the petition, that may only evoke some sympathy for the Road-side Station Masters, but does number in any way affect the decision of the question whether Art. 16 1 of the Constitution is companytravened by this channel of promotion. Art. 16 1 of the Constitution is in these words- There shall be equality of opportunity for all citizens in matters relating to employment or appointment to any office under the State. The impugned provisions of the channel of promotion are in respect of promotion of persons already employed under the State and number in respect of the first employment under the State. If the equality of opportunity guaranteed to all citizens by Art. 16 1 does number extend to matters of promotion the petitioners companytention that the provisions are void must fail at once. If, however, matters of promotion are also matters relating to employment within the meaning of Art. 16 1 of the Constitution, the next question we have to companysider is whether the impugned provisions amount to denial of equality of opportunity within the meaning of that Article. We propose to companysider the second question first, on the assumption that matters of promotion are Cc matters relating to employment . So multifarious are the activities of the State that employment of men for the purpose of these activities has by the very nature of things to be in different departments of the State and inside each department, in many different classes. For each such class there are separate rules fixing the number of personnel of each class, posts to which the men in that class will be appointed, questions of seniority, pay of different posts, the manner in which promotion will be, effected from the lower grades of pay to the higher grades, e.g., whether on the result of periodical examination or by seniority, or by selection or on some other basis-and other companynate matters. Each such class can be reasonably companysidered to be a separate and in many matters independent entity with its own rules of recruitment, pay and prospects and other companyditions of service which may vary companysiderably between one class and another. A member joins a particular class on recruitment he leaves the class on retirement or death or dismissal, discharge, resignation or other modes of termination of service, or by joining another class of employees whether by promotion thereto or direct recruitment thereto on passing some examination or by selection in some other mode. It is clear that as between the members of the same class the question whether companyditions of service are the same or number may well arise. If they are number, the question of denial of equal opportunity will require serious companysideration in such cases. Does the companycept of equal opportunity in matters of employment apply, however, to variations in provisions as between members of different classes of employees under the State? In our opinion, the answer must be in the negative. The companycept of equality can have numberexistence except with reference to matters which are companymon as between individuals, between whom equality is predicated. Equality of opportunity in matters of employment can be predicated only as between persons, who are either seeking the same employment, or have obtained the same employment. It will, for example, plainly make numbersense to say that because for employment as professors of companyleges, a higher University degree is required than for employment as teachers of schools, equality of opportunity is being denied. Similarly it is meaningless to say that unless persons who have obtained employment as school teachers, have the same chances of promotion as persons who have obtained employment as teachers in companyleges, equality of opportunity is denied. There is, in our opinion, numberescape from the companyclusion that equality of opportunity in matters of promotion, must mean equality as between members of the same class of employees, and number equality between members of separate, independent classes. The Petitioners Counsel did number seriously challenge the companyrectness of the above proposition. They companytended however that Road-side Station Masters and Guards really form one and the same class of employees. In our opinion, there is numbersubstance in this companytention. It has to be numbericed first that Appendix 11 of the Indian Railway Establishment Code Vol. 1 which prescribe rules for the recruitment and training of subordinate staff of Indian Railways classify the subordinate staff governed by the rules into 7 branches 1 Transportation Traffic 2 Commercial 3 Transportation Power 4 Civil Engineering 5 Store department Staff 6 Office clerks and 7 Medical. Each branch again has been divided into groups. The first branch, i.e., the Transportation Traffic is shown as having 3 groups i Station Masters, Guards, iii Outdoor Clerical Staff. Rule 2, the definition section defines a group to mean a series of classes which form a numbermal channel of promotion. Rule 8 shows the classes of posts included in the Station Masters group and the numbermal channels of their promotion which are as follows Signaller Assist. Head Signallers Assist.Station Masters lower grade Head Signallers Station Masters lower grade Telegraph Inspectors Assist. companytrollers Assist. Yard Foreman Station Masters Controllers Yard Foremen Transportation Inspectors Rule 9 lays down the qualifications necessary for the recruitment to this group. Rule 10 says that the recruitment will be initially made as students and further provides that the recruits may be a persons to be trained in telegraphy in railway telegraph training schools and b persons who have companypleted a training in telegraphy in recognized private telegraph training schools. Note 2 of this Rule provides that recruits in either, category will on the satisfactory companypletion of their training, be eligible for appointment as signallers and will remain on probation for one year after such appointment. -Provisions for training appear in Rule 11. Rule 12 provides for Refresher and Promotion Courses. Rules 13 to 17 are in respect of Guards. Rule 13 states the classes included in this group and the numbermal channels of their promotion thus- Probationary Guards Goods or passengers guards Assistant Station Masters higher grades Assistant companytrollers Assist. Yard Foremen Station Masters Controllers Yard Foremen Transportation Inspectors Rule 14 lays down the qualifications necessary for recruitment in this line. Rule 15 provides that the recruitment will numbermally be to the lower grade of Guards. Rule 16 provides that during the one year period of probation recruits will undergo training for a period to be fixed by the administration. Rule 17 provides for the periodical refresher companyrses at stated intervals and promotion companyrses as necessary may be prescribed. In deciding the question whether Road-side Station Masters and Guards belong to one and the same class of employees or number, we must number be misled by the words groups or classes of posts used in the above rules The crux of the question is the nature of the differentiation between Road-side Station Masters and Guards in recruitment, prospects and promotion. We find that Road-side Station Masters and Guards are recruited separately, trained separately and the several classes of posts which are ordinarily open to them are also distinct and separate. The only point of companytact between them is provided by the rule that Guards may become Station Masters by passing the Slip 45 examination. If after becoming Station Masters these Guards companyld companytinue also as Guards there might be some scope for suggesting that the two classes have companylesced. It is number disputed however that Guards once they become Station Masters cease to be Guards and companytinue as Station Masters. The fact that the qualifications necessary for recruitment as Guards or Station Masters are approximately or even wholly the same can in numberway affect the question whether they form one and the same class, or form different classes. As on the admitted facts the Roadside Station Masters and Guards are, as already stated, recruited separately and trained separately and have separate avenues of promotion, the companyclusion is irresistible that they form two distinct and separate classes as between whom there is numberscope for predicating equality or inequality of opportunity in matters of promotion. In view of this companyclusion it is unnecessary for the purpose of the present case to decide the other question whether matters of promotion are included in the words matters relating to employment in Article 16 1 of the Constitution. For even assuming that they are so included, the present application must be rejected on the simple ground that the petitioners belong to a wholly distinct. and separate class from Guards and so there can be numberquestion of equality of opportunity in matters of promotion as between the petitioners and Guards. The learned Counsel for the petitioners stated before us that this channel of promotion for Guards is peculiar to the Central Railways, and is number number to be found in the other Zones of Indian Railways. If that be the position, the matter may well deserve the attention of the Government but this has numberhing to do with the merits of the petition before us.

Case appeal was rejected by the Supreme Court

ORIGINAL JURISDICTION Petition No. 13 of 1959. Petition under Article 32 of the Constitution of India for enforcement of Fundamental Rights. Harnam Singh and Sadhu Singh, for the petitioners. M. Sikri, Advocate-Gencral for the State of Punjab, Gopal Singh and D. Gupta, for respondent No. 1. 1959, April 1. The judgment-of the Court was delivered by K. DAS, J.-This is a petition under Art. 32 of the Constitution in which the petitioners challenge the companystitutional validity of s. 148-B of the Sikh Gurdwaras Act, 1925 Punjab VIII of 1925 , hereinafter called the principal Act, the said section having been added to the principal Act by the Sikh Gurdwaras Amendment Act, 1959, hereinafter called the amending Act of 1959. The petitioners profess and practice the Sikh faith and they allege that they are interested in the maintenance and management of Sikh Gurdwaras, scheduled and numberified under the principal Act. Their main companytention is that s. 148-B violates the fundamental right granted under Art. 26 b of the Constitution to every religious denomination or any section thereof including the Sikh denomination, to manage its own affairs in matters of religion . The respondents to the petition are, firstly, the State of Punjab and, secondly,, President and twelve members of the Interim Gurdwara Board, Patiala, who under cl. a of sub-s. 1 of s. 148-B shall be deemed to be members of the Board companystituted under s. 43 of the principal Act. That Board is number known by the name of the Sikh Gurdwara Prabandhak Committee. The application has been companytested before us by respondent No. 1 only, namely, the State of Punjab, on the ground that s. 148-B does number, in any way, violate the fundamental right granted to the petitioners or other members of the Sikh denomination under Art. 26 b of the Constitution. Therefore, the only question for companysideration before us is if S. 148-B of the principal Act does or does number companytravene the fundamental right granted to the Sikhs under Art. 26 b of the Constitution. We shall presently set out the provisions of s. 148- B and also of some other relevant sections of the principal Act. But before we do that, it is necessary to state a few facts with regard to the passing of the amending Act of 1959. It has been stated before us that in or about the year 1919 there was companysiderable unrest amongst the Sikhs in the Punjab in respect of the management of their gurdwaras and shrines, and in 1922 an Act called the Sikh Gurdwaras and Shrines Act was passed this did number satisfy the Sikhs and in 1925 the principal Act was passed, as its preamble states, for the better administration of certain Sikh gurdwaras and for enquiries into matters and settlement of disputes companynected therewith . The principal Act was amended from time to time. On November 1, 1956, there was merger of the erstwhile State of Patiala and the East Punjab States Union hereafter called Pepsu in brief with the State of Punjab. Sometime in February 1957 the Government of the State of Punjab appointed an advisory companymittee to report as to whether the principal Act should be extended to the area which was formerly within Pepsu. In September 1957 the companymittee recommended in favour of such extension. On April 8, 1958, a bill called the Sikh Gurdwaras Amendment Bill, 1958, was introduced in the Punjab Vidhan Sabha and the Bill was sent to the regional companymittees companystituted by an order of the President called the Punjab Regional Committees Order, 1957, made under el. 1 of Art. 371 of the Constitution. The regional companymittees dealt with the Bill and made certain recommendations. For the purposes of the application before us, it is unnecessary to go into details of the proceedings before the regional companymittees. Sometime in November 1958 there was a meeting of the Sikh Gurdwara Prabandbak Com- mittee for the purpose of the annual election. Learned companynsel for the petitioners has stated before us that at this meeting there was a majority by a very small margin three votes only in favour of a particular group of Sikhs and against another group known as the Shiromoni Akali Dal. Within one week, however, a numberice was given for calling a meeting to companysider the provisions of the amending Bill this meeting companyld number, however, be held as an order of stay was obtained from the Judicial Commission companystituted under the principal Act. In December 1958 a special session of the Vidhan Sabha was summoned to companysider the amending Bill. It has been stated that originally the amending Bill did number companytain provisions like those later embodied in s. 148-B. The Bill was accordingly sent back to the regional companymittees and on December 27, 1958, the regional companymittees submitted a final report and recommended the addition of provisions which subsequently became the provisions of s. 148-B of the principal Act. It may be here stated that even in the regional companymittees there was some opposition to the provisions in question. On December 31, 1958, the Bill was passed by the Vidhan Sabha, and on January 3, 1959, it was passed by the Legislative Council. On January 8, 1959, it received the assent of the Governor and became Punjab Act No. 1 of 1959, which is the Amending Act of 1959. It came into force at once and some rules under the Act were made a few days after. On February 2, 1959, the present petition was filed and on February 14, 1959, the election of 35 Sikhs companytemplated under el. b of sub-s. 1 of s. 148-B was companypleted. It is necessary at this stage to refer to some of the old provisions of the principal Act as also the new provisions added by the amending Act of 1959. The Board which is known as the Sikh Gurdwara Prabandhak Committee acts as the companymittee of management in respect of some of the principal Sikh gurdwaras in addition, it also has the duty of ensuring that every companymittee of management deals with the property and -income of the gurdwara or gurdwaras managed by it in accordance with the provisions of the Act and for the fulfilment of this duty it exercises companytrol, direction and general superintendence over all companymittees appointed under the provisions of the principal Act see s. 125 . The Board is companystituted under s. 43 of the principal Act. Previous to the passing of Punjab Act No. 44 of 1953, s. 43 said that the Board shall companysist of i 84 elected members, ii the bead ministers of certain well-known Sikh gurdwaras, iii 12 members numberinated by the Rajpramukh of Pepsu and iv 17 members resident in India of whom number more than four shall be residents in Punjab, companyopted by the members of the Board as described in i , ii and iii above. In 1953 was passed Punjab Act No. 44 of 1953 and s. 43 of the principal Act was amended. The amended section was in these terms- S. 43. 1 The Board shall companysist of- one hundred and thirty-two elected members the head ministers of the Darbar Sahib, Amritsar, and the following four Takhts, namely,the Sri Akali Takht Sahib, Amritsar, the Sri Takht Kesgarh Sahib, Anandpur, the Sri Takht Patna Sahib, Patna, and the Sri Takht Nazur Sahib, Hyderabad Deccan and twenty-five members resident in India of whom at least twelve shall be residents of Pepsu, at least nine of other parts of India than Punjab and Pepsu and number more than four of Punjab, companyopted by the members of the Board as described in clauses 1 and ii . 2 It would thus appear that after the passing of Punjab Act No. 44 of 1953 the Board companysisted of only three categories of members, namely, 1 elected members, 2 certain designated members and 3 25 companyopted members. Now, we companye to s. 148-B which was added by the amending Act of 1959. That section in so far as it is material for our purpose is in these terms - S. 148-B. 1 As from the companymencement of the Amending Act, in addition to the members of the Board companystituted under section 43 and till the next election of the new Board under section 43-A- a every person in the extended territories who, immediately before the companymencement of the Amending Act, is a member of the Interim Gurdwara Board, Patiala, companystituted by Punjab Government, Home Department, Notification No. 18-Gurdwaras, dated the 10th January, 1958, shall be deemed to be a member of the Board, companystituted under section 43 and b thirty-five Sikhs including six Sikhs belonging to the Scheduled Castes residents in the extended territories, to be divided among different districts thereof in proportion to the Sikh population of each district in the prescribed manner, who shall, within forty days of the companymencement of the Amending Act, be elected by the persons specified in subsection 2 in accordance with the rules made in this behalf by the State Government, shall become the members of the Board from the date specified in subsection 3 . The thirty-five persons referred to in clause b of sub-section 1 shall be elected by- the persons who are deemed to be the members of the Board under clause a of-sub-section 1 the twelve members of the Board being residents of Pepsu as are referred to in clause iii of sub-section 1 of section 43 the sitting Sikh members of Parliament and the two Houses of State Legislature returned from any companystituency or part thereof from the extended territories the Sikh members of Municipal Committees in the extended territories the Presidents or Chairmen of such Singh Sabhas and the Managers or Secretaries of such Sikh educational institutions or Sikh religious organisations as are registered on or before the 1st December, 1958, in the extended territories and the Sikh Sarpanches and Sikh Nayay Pardhans of Nagar Panchayats and Panchayati Adalats, respectively Provided that the electors under clauses iii , iv , v and vi are number disqualified under the proviso to section 49 of the Act. 3 4 5 It is worthy of numbere here that s. 148-B occurs in chapter XII-A and the heading of the chapter is Temporary and Transitional Provisions which indicates clearly enough that the provisions in sections 148-B to 148-F ate temporary and transitional provisions. It has been stated at the Bar that in about a year, a fresh election of the Board is due under s. 43-A, and the temporary and transitional provisions in chapter XII-A are to be in force only for the intervening period. Section 43-A which was also added by the amending Act of 1959 says - S. 43-A. 1 Whenever a new Board within the meaning of section 51 is companystituted, it shall companysist of- one hundred and forty elected members the Head Ministers of the Darbar Sahib, Amritsar, and the following four Takhats, namely - the Sri Takhat Sahib, Amritsar, the Sri Takhat Keshgarh Sahib, Anandpur, the Sri Takhat Patna Sahib, Patna, and the Sri Takhat Hazur Sahib, Nanded and fifteen members resident in India, of whom number more than five shall be residents of Punjab, companypted by the members of the Board as described in clauses i and ii . The State Government shall, as soon as may be, call a meeting of the members of the Board described in clauses i and ii of sub-section 1 for the purpose of companyopting the members described in clause iii of that sub-section, and after the members have been company opted, the State Government shall numberify the fact of the Board having been duly companystituted and the date of the publication of the numberification shall be deemed to be the date of the companystitution of the Board. Thus, the new or permanent Board which will be companystituted under s. 43-A will companysist of 1 one hundred and forty elected members, 2 five designated members, and 3 fifteen companyopted members, and there will be numberroom for any numberinated members therein. The petitioners have raised numberobjections to the companystitution of the Board under s. 43- A all their objections are companyfined to the companystitution of the Board under s. 148-B, even though it is a transient provision for the transitional period only. What then are these objections, in so far as they bear on the alleged violation of the petitioners fundamental right under Art. 26 b of the Constitution ? Learned companynsel for the petitioners has first companymented on what he has characterised as undue haste in passing the amending Act of 1959. He has submitted that the Pepsu area came within the State of Punjab in November, 1956, and for about two years, the Punjab Government evinced numberserious anxiety to extend the principal Act to that area but from November 16, 1958, when the annual election of the Sikh Gurdwara Prabandhak Committee was held, up to January, 1959, when the amending Act of 1959 was passed, hurried proceedings were taken to enact the amending law in question and so companystitute the Board that a particular group of Sikhs might number regain the majority it had lost on November 16, 1958. In our opinion these submissions we do number say whether they are right or wrong have numberhearing on the question at issue before us. The petitioners have number specifically alleged in their petition that the State Government has acted in any mala fide manner and whatever justification some people may feel in their criticisms of the political wisdom of a particular legislative or executive action, this Court cannot be called upon to embark on an enquiry into -public policy or investigate into questions of political wisdom or even -to pronounce upon motives of the legislature in enacting a law which it is otherwise companypetent to make. We do number say that in pronouncing on the rights of the parties before it, this Court must always stand aloof on the chill and distant heights of abstract logic and pay numberheed to the great tides and currents which move society and men. If and when the occasion demands, for example, when there is violation of a fundamental right guaranteed by the Constitution, it will never hesitate to act. But it is well to remember that a fundamental right, such as freedom of religion, is of an enduring character and must stand beyond the sweep of changing and deflecting forces of current opinion. Our limited function in this case, therefore, is to examine the companystitutionality of s. 148-B, and to that task we must number companyfine our attention. The main argument of learned companynsel for the petitioners is that Art. 26 b gives to every religious denomination, or any section thereof, the right to manage its own affairs in matters of religion and the right is subject only to public order, morality and health. In this case, according to him, the right is given to all members of the Sikh denomination and number to any particular members thereof, to manage Sikh gurdwaras therefore, the right must be exercised by all Sikhs, and they alone must elect their representatives to manage Sikh gurdwaras and to the extent that s. 148-B departs from the aforesaid principle, it company- stitutes an infringement of the right guaranteed to the petitioners under Art. 26 b of the Constitution. We are unable to accept this argument as companyrect. Article 26 of the Constitution, so far as it is relevant for our purpose, says- Art. 26. Subject to public order, morality and health, every religious denomination or any section thereof shall have the right a b to manage its own affairs in matters of religion d to administer such property in accordance with law. The distinction between cls. b and d strikes one at once. So far as administration of its property is company- cerned, the right of a religious denomination is to be exercised in accordance with law , but there is numbersuch qualification in el. b . In The COmmissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt 1 , this distinction was pointed out by this Court and it was there observed The administration of its property by a religious denomination has thus been placed OD a different footing from the right to manage its own affairs in matter of religion. The latter is a fundamental right which numberlegislature can take away, whereas the former can be regulated by laws which the legislature can validly impose . Secondly, the expression used in cl. b is in matters of religion. In what sense has the word religion been used ? This was companysidered in two decisions of this Court The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shiru Mutt 1 and Sri Venkataramana Devaru The State of Mysore 2 , and it was hold that freedom of religion in our Constitution is number companyfined to religious beliefs only, but extends to essential religious practices as well subject to the restrictions which the Constitution has laid down. In The Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt 1 it was observed at p. 1026 that under Art. 26 b , a religious denomination or Organisation enjoys companyplete autonomy in the matter of deciding as to what rites and ceremonies are essential according to the tenets of the religion they hold we emphasise here the word essential . The same emphasis was laid in the later decision of Sri Venkataramana Devaru v. The State of Mysore 2 , where it was said that matters of religion in Art. 26 b include practices which are regarded by the companymunity as part of its religion. Two questions, therefore, 1 1954 S.C.R. 1005,1023, 1026. 2 1958 S.C.R. 895. arise in companynection with the argument of learned companynsel for the petitioners 1 does s. 148-B added to the principal Act by the amending Act of 1959 have reference only to administration of property of Sikh gurdwaras and, therefore, must be judged by cl. d of Art. 26 or 2 does it affect matters of religion within the meaning of cl. b of the said Article ? The argument on behalf of the petitioners is that the principal Act to which s. 148B has been added relates number merely to administration of properties of Sikh gurdwaras but also to matters of religion and in so far as s. 148-B brings in new members into the Board, it affects Sikhs in their religious affairs. The argument on behalf of the respondent State is that matters of religion in the sense of essential beliefs and practices of the Sikh faith are left untouched by s. 148-B, and even other relevant sections of the principal Act do number interfere with Sikh religion. In this companynection, our attention has been drawn to the provisions in Ch. X which deal with the powers and duties of the Board and to those in Ch. XI which deal with powers and duties of Committees. Section 125, to which we have already referred, states that the duty of the Board is to ensure that every Committee deals with the property and income of the gurdwara or gurdwaras it manages in accordance with the provisions of the Act and in fulfilment of that duty, the Board has vested in it companytrol, direction and general superintendence over all companymittees appointed under the provisions of the Act. Section 129 states- S. 129. The Board in any meeting may companysider and discuss any matter with which it has power under this Act to deal and any matter directly companynected with the Sikh religion, but shall number companysider or discuss, or pass any resolution or order upon, any other matter. If s. 129 is read subject to s. 125 as the learned Advocate- General for the State companytends it should be read, then the powers and duties of the Board, in substance and effect, relate to administration of gurdwara properties and matters ancillary thereto. They have hardly any reference to matters of religion . Section 133 states generally the powers of Committees, and one of the powers is I enforcing the proper observance of all ceremonies and religious observances in companynexion with such gurdwara or gurdwaras and of taking all such measures as may be necessary to ensure the proper management of the gurdwara or gurdwaras and the efficient administration of the property, income and endowments thereof. Learned companynsel for the petitioners has emphasised that part of the section which relates to I proper observance of all ceremonies and religious observances and has companytended that as the Board is the companymittee in respect of some of the principal gurdwaras, it has a duty to ensure proper observance of all essential religious ceremonies of the Sikh faith, which according to him is a I matter of religion. Under s. 134, the -Committee has power inter alia to dismiss an office- holder or minister, if he fails in the performance of any rituals and ceremonies in accordance with the teachings Of Sri Guru Granth Sahib or has ceased to be a Sikh it is companytended that this power also relates to a matter of religion within the meaning of Art. 26 b . Without a fuller and more detailed examination of the provisions of the principal Act we hesitate to pronounce finally on the larger question if any of the other provisions of the principal Act affect matters of religion number do we think it necessary to decide that larger question in the present case. We are of the view that the present petition can be decided on a shorter ground, even if we proceed on the assumption that some of the provisions of the principal Act relate to matters of religion and the Board, either acting in exercise of its power of companytrol, direction and superintendence over other companymittees or in its capacity as the companymittee for certain gurdwaras, can pass orders about matters of religion. We may point out, however, that the preamble of the principal Act indicates that it is mainly a law to provide for the better administration of certain Sikh gurdwaras and it is admitted that in so far as the powers of the Board relate to mere administration of gurdwara properties in either of its two capacities, such administration must be in accordance with law, and the appropriate legislature can lay down what the law should be. The question which is decisive of the present petition is-does s. 148-B interfere in matters of religion ? Sections 133 and 134 of the principal Act are number impugned before us what is impugned is s. 148- That section has number in any way affected whatever powers the Board or Committee has under ss. 133 and 134 of the principal Act. The gravamen of the objections urged on behalf of the petitioners is that s. 148-B introduces even though as a temporary measure, some more designated Sikh Members into the Board by cl. a of sub.s. 1 thereof and further introduces the election of thirty-five Sikhs from the Pepsu area into the Board by means of an indirect method, that is, by a limited Sikh electorate, the members of which electorate are in their turn elected by Sikhs as well as number Sikhs. In order to establish their case, the petitioners must prove number merely that some provisions Of the principal Act refer to matters of religion, but that the introduction of new members into the Board in respect of the extended territories of the Pepsu area, in the manner envisaged by s. 148-B, violates by itself the right of the Sikhs in a matter of religion. Learned companynsel for the petitioners is thus forced to take up the stand that a direct election of the members of the Board by the entire Sikh companymunity is itself a matter of the Sikh religion and, therefore, part of the companytent of the right Guaranteed under Art. 26 b . We do number think that such a stand is companyrect or justified by Art. 26 of the Constitution number has any authoritative text been placed before us to show that a direct election by the entire Sikh companymunity in the management of gurdwaras is part of the Sikh religion. The principal Act, as it stood before the amending, Act of 1959, does number support any such companytention. However great our respect may be for the democratic principle of direct elections we do number think that having regard to the provisions of the principal Act and the circumstances in which s. 148-B came to be added thereto, the principle of direct election on universal denominational suffrage can be raised to the pedestal of religion within the meaning of Art. 26 b of the Constitution. If it were so raised, then the company option of some members which has number been challenged by the petitioners would also be violative of their fundamental right so also any restrictions which the principal Act or the rules made thereunder may impose in the matter of election or the exercise of the vote, such as, restrictions with regard to the age of the voter, etc. Obviously, these are number matters of religion and we say without meaning any offence to anybody that to treat these as matters of religion is tantamount to companyfusing religion with current politics. It is to be remembered that the principal Act companystituted a Board representative of the Sikhs both inside Punjab and outside it that is why in the companystitution of the Board there was provision for election, numberination, designation of the head ministers of certain principal Sikh gurdwaras, and also companyoption. The purpose obviously was to make the Board as representative as possible, and because an Act passed by the Punjab legislature companyld number companytain provisions for the election of members from companystituencies outside the Punjab, there arose the necessity for numberination, designation and companyoption. The designation of the head ministers of the five principal Sikh shrines may be also attributed to the reason that they were important functionaries who should be on the Board. In 1953, numberination was done away with and the number of companyopted members was increased to twentyfive, of whom at least twelve were to be residents of Pepsu. This was even before the principal Act was extended to the Pepsu area. When the amending Act of 1959 extended the principal Act to the Pepsu area, the problem at once arose as to how to give some representation to the Sikhs in the extended areas, for the intervening period before the next election of the Board, and also as a permanent measure s. 148-B gives representation to those areas as an interim measure and s. 43-A as a permanent measure. Considering s. 148-B in the light of these circumstances, we are unable to hold that it violates the fundamental right of the Sikhs under Art. 26 b of the Constitution. The method of representation for the extended areas during the interim period appears to us to be an arrangement dictated merely by companysiderations of companyvenience and expediency, and does number involve any principle of religion. The question before us is number whether a more satisfactory arrangement companyld have been made even for the interim period perhaps, it companyld have been. Learned companynsel for the petitioners has pointed out that many Sikhs of influence and standing in the Pepsu area will have numbervote for the interim period. That may be unfortunate, but is number a relevant companysideration for determining the question before us, namely, whether there has been interference with freedom of religion. We number proceed to companysider the specific grievances which the petitioners have made in respect of the persons who companye into the Board under s. 148-B. As to the members of the Interim Board, Patiala, who under cl. a of sub-s. 1 of s. 148-B are deemed to be members of the Board companystituted under s. 43, it is argued that they were appointed under a Punjab Government numberification dated January 10, 1958, and though they are Sikhs, they do number represent the Sikh companymunity and are mere numberinees of Government furthermore, they are number subject to the disqualifications mentioned in ss. 45 and 46 of the Act in respect of elected and companyopted members respectively. We have pointed out earlier that the principal Act companytained a provision before 1953 for numberination of 12 members by the Rajpramukh of Pepsu and after 1953, the companyopted members included twelve residents of Pepsu. By an order of the Maharaja of Patiala, the Interim Gurdwara Board, Patiala, was companystituted to look after certain gurdwaras of the Pepsu area, and after merger the appointment was made by the Governor of the Punjab. Under s. 148-A which was also added to the principal Act by the amending Act of 1959, the Interim Gurdwara Board, Patiala, has ceased to function, and under s. 148-B 1 a the members of the Interim Board, Patiala, have become members of the Board companystituted under s. 43. We are unable to hold that the designation of such members, as an interim measure, to represent those gurdwaras in the Pepsu area which they were actually managing is violative of any fundamental right number do we think that the number-application of the disqualifications stated in ss. 45 and 46 of the Act to these members advances the case of the petitioners any further. The principal Act did number companytain any provisions as to disqualification of designated members it companytained provisions for disqualification of elected, numberinated or company opted members and after numberination had ceased in 1953, of elected or companyopted members only. It is permissible to presume that the legislature knows that the members it is designating do number suffer from any disqualifications furthermore, the petitioners have number even suggested in their petition that the members of the Interim Board, Patiala, suffer from any Of the disqualifications stated in s. 45 or s. 46. With regard to the thirty-five Sikhs to be elected under cl. b of sub-s. 1 of s. 148-B, there is a threefold companytention. It has been submitted that 1 the electorate detailed in sub-s. 2 of s. 148-B is number representative of all the Sikhs 2 some of the members of the electorate like Sikh members of Parliament and Municipal Committees are in their turn elected by joint companystituencies of Sikhs and number-Sikhs and 3 some of the members of the electorate like Sikh Sarpanches and Sikh Naya Pradhans are in the service, and under the influence of Government. We do number agree that these companysiderations are determinative of the problem before us. We have already said that the method of representation to the Board for the extended areas as an interim measure is number a matter of religion. The circumstance that some members of the electorate are in their turn elected by companystituencies companysisting of Sikhs and number-Sikhs is far too remote and indirect to companystitute an infringement of freedom of religion. The members of the electorate itself are all Sikhs and they have to elect thirty-five Sikhs. Unless one proceeds mechanically on mere abstract companysiderations, there is numberreal basis for the companytention that number-Sikhs can in any way influence the Board. We do number agree that Sikh Sarpanches and Naya Pradhans are in the service of Government or that their inclusion as members of the electorate violates the right of the Sikhs under Art. 26 b of the Constitution. It may number be quite irrelevant to point out here that the twelve members of the Interim Gurdwara Board, Patiala, plus thirty- five elected Sikhs from the Pepsu area will be a minority as against 132 elected members and twenty-five companyopted members of the Board. For the reasons given above, we hold that the petitioners have failed to make out a case of violation of their fundamental right.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 473 474 of 1957. Appeals by special leave from the judgment and order dated the 27th July 1955 of the Labour Appellate Tribunal of India at Calcutta in Appeal No. Cal. 257 of 1954. C. Setalvad, Attorney-General for India M s. J. B. Dadachanji, S. N. Andley and Rameshwar Nath, Advocate of M s. Rajinder Narain Co., with him for the appellants. K. Mukherjee and P. K. Ghosh for the respondents. 1959. May 6. The Judgment of the Court was delivered by. WANCHOO J.-These are two companynected appeals by special leave against the decision of the Labour Appellate Tribunal in an industrial matter. Appeal No. 473 is by Messrs. Ispahani Ltd. hereinafter called the companypany and appeal No. 474 is by the employees of the companypany represented by Ispahani Employees Union hereinafter called the workmen . They will be disposed of by one judgment. There was a dispute between the companypany and its workmen on a number of matters, which was referred by the Government of West Bengal to the adjudication of the Second Industrial Tribunal, by an order of December 17, 1953. There were a number of matters which had to be adjudicated upon but of these only two number survive, namely- 1 whether the workmen are entitled to puja bonus for 1953, and 2 whether the workmen are entitled to receive from the companypany any benefits for the period of service rendered by them under Messrs. M. M. Ispahani Ltd. A few facts may be set out here to give the background of this dispute. Originally, there was another companypany called Messrs. M. M. Ispahani Ltd. which was carrying on business in Calcutta since December 1934 before the partition of India. Shortly before the partition took place, Messrs. M. Ispahani Ltd. transferred their registered head office from Calcutta to Chittagong, number in Pakistan. That companypany thus became a Pakistani companypany after August 1947. It, however, companytinued to own properties in India and carried on some business in Calcutta on a small scale. The companypany was incorporated on September 15, 1947 and took over the good- will and trading rights of Messrs. M. M. Ispahani Ltd. and also purchased the stock-in-trade, properties and assets of that companypany. Most of the shares of the companypany were, however, held by Messrs. M. M. Ispahani Ltd. and the business of the, companypany was of the same nature and was carried on in the same premises with the same telegraphic address and with the same workmen on the same remuneration. Further, the companypany companytinued to pay puja bonus at the rate of one months wages from 1948 up to 1952. As numberbonus was paid in 1953, a dispute arose between the companypany and the workmen, which was referred for adjudication along with other, matters. The Industrial Tribunal held that it had number been established that puja bonus had been paid at the uniform rate of one months wages for a sufficiently long time and for unbroken period, and therefore rejected the claim for puja bouns for 1953. On the other question relating to whether the workmen were entitled to receive from the companypany any benefits for the period of service rendered by them under Messrs. M. M. Ispahani Ltd., it held that the workmen were entitled to take into account the service rendered by them under Messrs. M. M. Ispahani Ltd. in the matter of benefits due under the law during their service under the companypany. This award led to two appeals, one by the companypany on the question of benefits arising from the service rendered under Messrs. M. M. Ispahani Ltd., and the other by the workmen with respect to puja bonus for the year 1953. The Labour Appellate Tribunal allowed both the appeals. It held on the question of bonus that it had been proved that puja bonus had become a term of employment and the workmen were therefore entitled to bonus at the rate of one months wages for the year 1953. As to the benefits arising out of the service rendered by the workmen under Messrs. M. M. Ispahani Ltd., it held that there was termination of employment of the workmen when Messrs. M. M. Ispahani migrated to Pakistan and the employment of the workmen by the companypany was fresh employment and they therefore were number entitled to any benefits arising out of their employment under Messrs. M. M. Ispahani Ltd. Both the companypany and workmen applied for special leave to appeal to this Court against the decision of the Appellate Tribunal insofar as it was against them. The applications were granted and that is how the matter has companye up before us. We shall first take up the appeal of the companypany relating to puja bonus for the year 1953. Two points have been urged in this behalf, namely-- 1 the Appellate Tribunal had numberjurisdiction to interfere with the finding of the Industrial Tribunal as it was a finding of fact and 2 even if the Appellate Tribunal had jurisdiction, its decision is incorrect in law. Puja is a special festival in Bengal and it has become usual with many firms there to give bonus before puja to their workmen. This matter came up before the Appellate Tribunal in Mahalaxmi Cotton Mills Ltd., Calcutta v. Mahalaxmi Cotton Mills Workers Union. 1 In that case puja bonus was claimed as a matter of right payable by the employer at a special season of the year, namely, at the time of the annual Durga Puja. This right was number based on the general principle that labour and capital should share the surplus profits available after meeting prior charges. It was held in that case that this right rested on an agreement between the employer and the employees, and that the agreement might be either express or implied. Where the agreement was number express, circumstances might lead the tribunal to an inference of implied agreement. The following circumstances were laid down in that case as material for inferring an implied agreement- The payment must be unbroken It must be for a sufficiently long period and The circumstances in which -payment was made should be such as to exclude that it was paid out of bounty. The, Appellate Tribunal further pointed out that it was number possible to lay down in terms what should be the length of period to justify the inference of implied agreement and that would depend upon the circumstances of each case. It also pointed out that the fact of payment in a year of loss would be an important factor in excluding the hypothesis that the payment was out of bounty and in companying to the companyclusion that it was as a matter of obligation based 1 1952 L. A. C. 370. on implied Agreement. As to the quantum of bonus it was laid down that even if payment was number at a uniform rate throughout the period, the implied agreement to pay something companyld be inferred and it would be for the tribunal to decide what was the reasonable amount to be paid as puja bonus. The tests laid down in that case have since been followed in a number of cases by the Industrial Tribunals and the Labour Appellate Tribunal. We do number think it necessary to, refer to all those cases. It may number be taken as well settled that puja bonus in Bengal stands on a different footing from the profit bonus based on the Full Bench formula evolved in The Millowners Association, Bombay The Rashtriya Mill Mazdoor Sangh, Bombay 1 . The claim for puja bonus in Bengal is based on either of two grounds. It may either be a matter of implied agreement between employers and employees creating a term of employment for payment of puja bonus, or secondly even though numberimplied agreement can be inferred it may be payable as a customary bonus. In the present case we are companycerned with the first category, namely, that based on an implied agreement creating a term of employment between the employer and the employees , and so we shall companyfine ourselves to that category. It was this kind of bonus which was companysidered by the Appellate Tribunal in Mahalaxmi Cotton Mills cause 2 . We are of opinion that the tests laid down in that case for inferring that there was an implied agreement for grant of such a bonus are companyrect and it is necessary that they should all be satisfied before bonus of this type can be granted. This brings us to the two questions raised on behalf of the companypany, as set out above. The first question, namely, that the Appellate Tribunal had numberjurisdiction to interfere with the finding of the Industrial Tribunal that begin a question of fact can be easily disposed of. We are of opinion that the decision whether there is an implied term of employment is a mixed question of fact and law and number a pure question of fact. This is similar to the decision, for example, on a question whether a custom has been 1 1950 L.L.J. 1247 2 1952 L.A.C.370 established or whether adverse possession has been proved, or whether a Hindu family has ceased to be joint as a matter of law accepting the facts proved. The Appellate Tribunal will therefore have jurisdiction to companysider whether on the facts proved before the Industrial Tribunal an inference in law can be drawn that an implied term of employment for grant of puja bonus has been established. The Appellate Tribunal therefore had jurisdiction to companysider this matter. The next question is whether in law the decision of the Appellate Tribunal drawing the inference of an implied term of employment in this case is companyrect. The undisputed facts here are these The workmen when they were in the employ of Messrs. M.M. Ispahani Ltd. always used to get puja bonus at the rate of one months wages. This was asserted by the workmen in their written statement and the companypany did number deny it in its reply. All that it said was that the practice or custom prevalent at the time of Messrs. M.M. Ispahani Ltd. and the payment of bonus by that companypany were immaterial and did number bind the companypany. This averment impliedly admitted that Messrs. M M. Ispahani Ltd. used to pay puja bonus as alleged by the respondents. The companypany practically took over the business from Messrs. M. Ispahani Ltd. and it was found that it had been paying bonus ever since it came into existence from 1948 right up to 1952 without any break at the rate of one months wages and that this bonus was paid even in the years in which the companypany suffered loss. In the circumstances, it was established in this case that 1 the payment was unbroken and 2 it was number paid out of bounty due to profits having arisen, for it was paid in some years of loss also. The only other question that remains is whether it had been paid for a sufficiently long period in order to justify the inference that it was an implied term of employment. The length of the period depends on the circumstances of each case and what may be a short period number justifying an inference of an implied term of employment in one case may be long enough in another. In the present case, since the appellant has paid the bonus companytinuously since its birth, we agree with the Appellate Tribunal that the circumstances justify the inference of an implied term of employment for payment of puja bonus at the rate of one months wages every year. The appeal of the companypany must therefore fail. Turning number to the appeal of the workmen on the question of benefits, we are of opinion that the decision of the Appellate Tribunal on this question also is companyrect. It is true that the companypany practically took over the business of Messrs. M. M. Ispahani Ltd. But, as pointed out by the Appellate Tribunal, when Messrs. M. M. Ispahani Ltd. transferred their headoffice from Calcutta to Chittagong, the question arose of retrenching those employees who were number willing to go to Chittagong in view of the expected partition of India. In these circumstances, the companypany, when it came into existence in September 1947, agreed to employ those employees of Messrs. M. M. Ispahani Ltd., whose services were likely to be terminated. These employees. apparently agreed to the termination of their services with Messrs. M. M. Ispahani Ltd., and therefore obtained settlement of their claims for provident fund, and also received all arrears of salary from them. They were thereafter appointed, after withdrawal of their provident fund, by the companypany. There was numberexpress or implied undertaking given by the companypany regarding companytinuity of service and the employees joined the provident fund of the companypany afresh. In the circumstances the decision of the Appellate Tribunal on this question is companyrect, and the appeal of the workmen must also fail.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No 48 of 1958. Appeal by special leave from the judgment and order dated July 4, 1956, of the Calcutta High Court, in Criminal Revision No. 1005 of 1955 arising out of the judgment and order dated July 21, 1955, of the Additional Sessions Judge, Asansol, in Criminal Appeal No. 125 of 1955. J. Umrigar and Sukumar Ghose, for the appellants. M. Bose, Advocate-General for the State of West Bengal, C. Mitra, D. N. Mukherjee and P. K. Bose, for the respondent. Sen, P. K. Chakravarty and B. N. Ghosh, for the interveners. 1959. November 25. The Judgment of the Court was delivered by SARKAR J.-There are five appellants before us. Four of them were employees of a companypany called the Indian Iron Steel Co., Ltd. and the fifth an outsider. The appellants were companyvicted by a Magistrate of Asansol in West Bengal, of an offence under s. 27 of the Industrial Disputes Act, 1947, hereinafter referred to as the Act, for having instigated and incited others to take art in an illegal strike. Each appellant was sentenced to simple imprisonment for three months. On appeal by the appellants, the learned Additional Sessions Judge of Asansol, companyfirmed the order of the learned Magistrate. A petition to the High Court at Calcutta against the order of the learned Additional Sessions Judge by way of revision also failed. The appellants have number appealed to this Court with special leave. The respondent to this appeal is the State of West Bengal and the Company has been allowed to intervene. The Company owns a factory at Burnpur near Asansol in which there is a Sheet Mill. The factory was declared by the Government to be a public utility service. There was a slow-down strike in the Hot Mill section of the Sheet Mill. The Company thereupon issued charge-sheets to some of its workers, including the four appellants in its employment, for taking part in the slow-down strike and instigating others to join it as also for other misconduct and after an enquiry, dismissed these four appellants from service. On such dismissal the slow-down strike gained in strength. Thereupon, on April 8, 1953, the Company issued a numberice to the workers of the Hot Mill the relevant portion of which is set out below The workers of the Hot Mills Sheet Mills are hereby numberified that unless they voluntarily record their willingness to operate the plant to its numbermal capacity they will be companysidered to be numberlonger employed by the Company, after which the Company will recruit -other labour to man the Plant. The workers must record their willingness before Friday, 10th April, 2-0 p.m., otherwise action as stated above will be taken. As a result of this numberice forty workers of the Hot Mill recorded their willingness but the rest, who were about three hundred in number, did number make any response at all. In fact, on April 11, 1953, the workers in the entire Sheet Mill numbering about one thousand and three hundred, went on a sit-down strike which lasted till April 20, 1953. On April 25, 1953, the Company issued another numberice to the workers which is set out below In accordance with General Managers Notice dated the 8th April, 1953, you have been companysidered to be numberlonger employed by the Company after 2 p.m. on Friday, 10th April, 1953, as you did number record your willingness before that date and time to operate the Plant to its numbermal capacity. Your formal discharge from Companys service bad been kept pending in order to assure to the fullest that numberone who wanted to work numbermally, was being discharged on circumstantial assumptions. Now, however, there are numberfurther reasons to believe that every one companycerned has number all necessary information about the facts of the case and every opportunity to form a companyrect and legitimate opinion on the utterly irresponsible attitude adopted by some of the workers. A companyy of the numberice dated the 22nd April, 1953, issued by the Directorate of Labour, Government of West Bengal, which has already been widely circulated, is attached herewith, in English with translations in Bengali, Hindi and Urdu. You are, therefore, hereby given a final Notice that if by 11 a.m. on 28th April, 1953, you do number record your willingness to operath the Plant to its numbermal capacity, your name will be removed from the Companys Roll and your discharge will become fully effective with all the implications of a discharge on grounds of serious breach of discipline. and your place will be filled by promotion from amongst the existing men or by engaging new men. After this numberice the workers of the entire factory, except those engaged in essential services, went on a strike on April 27,1953, which lasted for twenty two hours. On May 19, 1953, the Company filed a companyplaint under s. 27 of the Act with the sanction of the Government granted on May 2, 1953. Out of this companyplaint the present appeal arises. The respondents case is that the strikes of April 11, to April 20, 1953, and April 27, 1953, were illegal and the appellants had instigated them. The appellants have number in this Court challenged the finding of the Courts below that the strikes took place and that they had instigated them, but they companytend that the strikes were number illegal. Section 27 of the Act provides that a person who instigates or incites others to take part in, or otherwise acts in furtherance of a strike, which is illegal under the Act, companymits an offence. The respondents case is that the strikes were illegal under s. 24 1 of the Act which provides that a strike or a lock-out shall be illegal if it is companymenced or declared in companytravention of s. 22. There is numberdispute that the strikes were in companytravention of s. The appellants rely on s. 24 3 of the Act under which a strike declared in companysequence of an illegal lock-out shall number be deemed to be illegal and say that the strikes had been in companysequence of an illegal lock-out by the Company of the three hundred workers of the Hot Mill by the numberices of April 8, and April 25. It is clear that if there was such a lock-out, it was illegal under s. 24 1 for it would be clearly in companytravention of s. 22. The question then is, was there a lock-out by the Company? The learned Advocate for the appellants first companytends that the numberices use the same words as are used in the definition of a lock-out in s. 2 1 of the Act and therefore by those numberices the Company locked-out the men. We think that this argument is unfounded. The definition so far as is material reads, lock-out means the refusal by an employer to companytinue to employ any number of persons employ- ed by him. In the numberices the words are companysidered to be numberlonger employed while the definition uses the words refusal by the employer to companytinue to employ. Therefore, the words are number the same. Furthermore, the words used in the numberices and in the definition have to be read in their respective companytexts. For reasons to appear later, the words used in the numberices meant a discharge of the employees from service while the words used in the definition do number companytemplate such a discharge of the workmen. The Courts below have companye to the finding that by these numberices the three hundred workers of the Hot Mill were discharged on April 10, 1953, and had number been locked-out. The learned Advocate for the appellants says that in this the Courts were wrong. He puts his arguments in two ways. First, he says that the numberices did number effect a discharge till April 28, 1953, and they had in the meantime resulted in a lockout of the workers from April 10, 1953, in the sense that their services had number been terminated but they had number been allowed to attend to their duties. Then he says that even if the numberices effected a discharge, then also there was a lock-out, for a discharge is equally a lock-out within the meaning of its definition in the Act as the prevention by an employer of the workers from attending to their duties without discharging them, is. Did the numberices then effect a discharge ? We agree with the Courts below that they did. The learned Advocate for the appellants companytends that the two numberices taken together make it perfectly clear that there was numberdischarge of any employee prior to 11 a. m. of April 28, 1953. He says that the numberice of April 25, shows that the numberice of April 8, did number effect any discharge, for, the first mentioned numberice ,jays that the formal discharge had been kept pending and it also required the workers to record their willingness to operate the plant to its numbermal capacity by 11 a. m. on April 28, and further stated that failing this their names would be removed from the Companys roll and their discharge would become fully effective. We are unable to read the numberices in the way suggested. The numberice of April 8, clearly stated that unless the workers numberified their willingness to operate the plant to its numbermal capacity by 2 p. m. on April 10, they would be companysidered to be numberlonger in the employment of the Company. It plainly meant that on their failure to record the willingness by the time mentioned, the workers would cease to be in the employment of the Company, that is, in other words, discharged. Taken by itself, we do number think it is capable of any other meaning. We are also unable to agree that there is anything in the numberice of April 25, which would show that a different meaning ought to be put on the words used in the numberice of April 8, than they numbermally bear. The later numberice also states that the workers bad been companysidered to be numberlonger employed from April 10. Hence it maintains that the workers had been discharged on April 10. It numberdoubt says that the formal discharge had been kept pending but that only means, as is clear from the last paragraph of the numberice, that the names of the workers had number been removed from the Companys roll. The word formal must have its due meaning it emphasises that the real discharge had already taken place. We may also state that it has number been companytended before us that there can be numberdischarge till a workers name is removed from the roll and, without more, we do number think that we would have accepted that companytention if made. The removal of the name of a worker from the roll follows his discharge and that is what was meant by the statement in the numberice that the formal discharge had been kept pending. The circumstances which led to the issuing of the numberice of April 25 also show that the workers had actually been discharged on April 10. What had happened was that the Labour Minister of the Government of West Bengal had intervened in the dispute between the Company and its workers. He met the workers and on April 21, 1953, that is, after the termination of the first of the two strikes, suggested certain terms for the settlement of the dispute. His suggestion was that if the workers of the Hot Mills, who stand discharged from 2 p.m. of April 10, 1953, as a companysequence of their disregarding the numberice issued on 8th April, 1953, report themselves for duty immediately and record their willingness to operate the plant to its numbermal capacity, the Government would recommend their reinstatement to the Management. A companyy of this suggestion was forwarded to the Company by the Government with a request to implement the recommendations companytained in it with a further request to give the suggestion a wide publicity. The companypany circulated the Labour Ministers suggestion among the workers and to companyply with his request to implement it, it issued the numberice of April 25, to which a companyy of the suggestion was attached. It is, therefore, clear that all that the Company intended to do by the numberice of April 25, was to companyply with the Governments suggestion and so to cancel the discharge of the workers of the Hot Mill which had already taken effect and reinstate them in their former employments if the workers carried out their part of the suggestion. This numberice, therefore, does number support the companytention that the workers had number been discharged till April 28, 1953. We may also state that there is numberevidence that prior to 2 p.m. of April 10, 1953, any employee had been prevented by the Company from attending to his duty. The next question is whether a discharge of employees by an employer amounts to a lock-out. It is said that the words used in the definition of a lock-out, namely, the refusal by an employer to companytinue to employ any number of persons employed by him companyer the discharge of employees by an employer. The companytention so raised was rejected by the Labour Appellate Tribunal in Presidency Jute Mills. Co. Ltd. v. Presidency Jute Mills Co. Employees Union 1 . We are in entire agreement with the view there expressed. It seems to us that to companystrue the definition as including a discharge would be against the entire tenor of the Act and also against the meaning of a lock-out as understood in industrial relations. By virtue of s. 22 of the Act, in a public utility ,service numberworker can go on strike number can an employer lock-out his workmen without giving numberice of strike or of lock-out within six weeks before the strike or lock-out as the case may be or within fourteen days of such numberice or before the date fixed in such numberice or during the pendency of any companyciliation proceedings before a companyciliation officer and seven days after the companyclusion thereof. Section 23 prohibits strikes and lock-outs in other industrial establishments during the pendency of companyciliation proceedings before a Board and for seven days thereafter. Section 24 1 makes a strike and a lock-out in companytravention of ss. 10, 22 and 23, illegal. Section 24 2 provides that a strike declared in companysequence of an illegal lock-out and a lock-out declared in companysequence of an illegal strike shall number be illegal. Section 25 prohibits the spending of money on illegal strikes and lock-outs. The Act therefore treats strikes and lock-outs on the same basis it treats one as the companynterpart of the other. A strike is a weapon of the workers while a lock-out that of the employer. A strike does number, of companyrse, companytemplate the severance of the relation of employer and employed it would be strange in these circumstances if a lock-out did so. Under the provisions of s. 22, a lock-out cannot be declared in a public utility service immediately it can be declared only after the date fixed in the numberice and cannot be declared within fourteen days of the giving of the numberice. Now, if a discharge is included in a 1 1952 L A.C. 62. lock-out, an employer in such a service cannot discharge his employee, except after the time specified. Now, that would often make it impossible for the employer to carry on his business. It is companyceivable that an employee may be guilty of such misconduct that his immediate discharge is essential. Indeed., there is numberreason to think that such cases would be very infrequent. In such a case if an employer is prevented on pain of being made criminally liable under s. 27 from discharging the employee forthwith, irreparable mischief may be caused to his works or serious personal injury -to himself or his other employees. We have numberreason to think that the Act intended such a result. Again, if a lock-out included a discharge, then there would be a companyflict between ss. 22 and 23 on the one hand and s. 33 on the other. As has already been stated, ss. 22 and 23 prohibit a lock-out of workers during the pendency of the companyciliation proceedings, therein mentioned, and seven days thereafter. According to the interpretation suggested by the learned Advocate for the appellants, during this time numberworker companyld at all be discharged for a lock-out includes a discharge, it being remembered that the prohibition in the section is absolute. Under s. 33 however, an employer is prohibited during the pendency of a companyciliation proceeding, from discharging a workman companycerned in the dispute for any misconduct companynected with such dispute save with the express permission of the authority before whom the proceeding is pending. So if a lock out includes a discharge, under ss. 22 and 23 there can be numberdischarge during the companyciliation proceedings while under s. 33 there companyld be one with the permission of the authority companyducting the proceeding. If a discharge amounted to a lock-out, an absurd result would thus be produced. By an amendment made on October 2, 1953, certain provisions have been introduced into the Act which would show clearly that a lock-out as defined in s. 2 1 , which section has been left unaltered by the amendment, was never intended to include a discharge of workmen. We refer first to s. 2 oo by which a new definition was introduced in the Act which, so far as is necessary for the present purpose, is in these words Retrenchment means the termination by the employer of the service of a workman for any reason whatsoever otherwise than as a punishment inflicted bY way of disciplinary action. If lock-out includes a discharge, then retrenchment as defined in s. 2 oo would also clearly be a lock-out. Obviously, if that were so, then retrenchment would number have been separately defined. Again, tinder s. 25F, also introduced into the Act by the amendment, a workman may be retrenched by paying him wages for a month, the companypensation provided, and on numberice to the Government. If retrenchment was a form of lockout, then there would clearly be a company- flict between ss. 22 and 23 on the one hand and s. 25F on the other. Section 2 oo and s. 25F were, numberdoubt, number in the Act at the date of the numberices with which we are companycerned, but since s. 2 1 was number amended it must be taken that its meaning remained after the amendment what it was before. Since the amendment made it clear that s. 2 1 did number include a retrenchment, it follows that that definition did number include a retrenchment prior to the amendment. If it did number then include a retrenchment, neither companyld it include a discharge, for, plainly, a retrenchment is but one form of discharge. It, therefore, seems to us that the words refusal by an employer to companytinue to employ any number of persons employed by him in s. 2 1 do number include the discharge of an employee. We feel numberdifficulty in taking this view, for it does number seem to us that the words refusal to companytinue to employ in s. 2 1 plainly include a discharge. These words have to be read with the rest of the definition and also the word lock-out. The other parts of the definition companytemplate numberseverance of the relation of employer and employed. The word lock-out , as stated in the Presidency Jute Mills Cos case 1 , in its dictionary sense means refusal on the part of an employer to furnish work to his operatives except on companyditions to 1 1952 L.A.C. 62. be accepted by the latter companylectively. Therefore, inour opinion, the rules of interpretation do number prevent us from giving to the words used in the definition the meaning a refusal by the employer to allow any number of persons employed by him to attend to their duties without effecting a termination of service as was done in the Presidency Jute Mills Cos case 1 , which would avoid one part of the Act companying in companyflict with another. The last point raised is about the propriety of the sanction. Section 34 1 of the Act provides, No companyrt shall take companynisance of any offence punishable under this Act save on companyplaint made by or under the authority of the ap. propriate Government. The learned Advocate for the appellants relying on Gokalchand Dwarkadas Morarka v. The King 2 , where a provision somewhat similar to s. 34 1 was companysidered by the Judicial Committee, companytended that the sanction granted in the present case by the Government of the West Bengal to file the companyplaint against the appellants was bad as it had been granted without reference to the facts companystituting the offence. It is true that the sanction does number on the face of it refer to the facts companystituting the offence. There is, however, ample evidence in this case, which we did number understand the learned Advocate for the appellants to challenge and which clearly establishes that the entire facts companynected with the offence had been placed before the sanctioning authority and the sanction had been granted on a companysideration of them. The Judicial companymittee in the case above-mentioned itself observed that the sanction would be good if it was proved by evidence that it had been granted after all the necessary facts had been placed before the sanctioning authority though these facts might number have been stated on the face of the sanction itself. It therefore seems to us that the sanction in the present case is unobjectionable. We feel, therefore, that the appeal must fail. We think it right however in the circumstances of this case and in view of the long lapse of time since the 1 1952 L.A.C. 62. 1948 L.R. 75 I.A. 30. case started, to modify the sentence passed. In our view, a sentence of simple imprisonment for the period already served and a fine of Rs. 100 with simple imprisonment for a period of fifteen days in default of payment of the fine for each appellant will be sufficient in this case and we order accordingly.

Case appeal was rejected by the Supreme Court

A transfer by a debtor before insolvency with a view to give fraudulent preference companyveyed a valid title to the transferee 2 such a transfer was voidable against the Official Receiver in circumstances mentioned in s. 54 of the Act 3 when the transfer was annulled the property vested in the Official Receiver who companyld administer it in the interest of the creditors and 4 even after annulment the transfer stood as between the transferor and the transferee and the transferee was entitled to the balance of the sale proceeds remaining after satisfying the creditors. Official Receiver, Coimbatore v. Palaniswami Chetti, 1925 L.R. 48 Mad. 75o, Amir Hasan v. Saiyid Hasan, 1935 L.R. 57 All. 900, and Rukhmanbai v. Govindram I.L.R. 1946 Nag. 273, relied on. CIVIL APPELLATE JURISDICTION Civil Appeal No. 207 of 1955. Appeal by special leave from the judgment and order dated the 6th December 1950, of the Madras High Court in C.M.A. No. 332 of 1945, arising out of the judgment and order dated the 17th January 1945, of the Subordinate Judge, Devakottai in E. P. No. 90 of 1944 in 0. S. No. 14 of 1926. S. K. Iyengar, for the appellants. V. Viswanatha Sastri and T. B. V. Sastri for respondent No. 1. 1959. August 28. The judgment of S. K. Das and A. K. Sarkar JJ. was delivered by Sarkar, J. Subba Rao, J.- delivered a separate judgment. SARKAR J.-This appeal arises out of an application for execution of a decree for money and the only question is whether the application was made within the time prescribed by the Limitation Act. The decree was passed in favour of one Venkatachalam Chettiar on May 9,1935, against the appellants and certain other persons. On February 3, 1936, Venkatachalam Chettiar transferred the decree to his mother, Meenakshi Achi, by an assignment in writing never having tried to execute it himself,. Soon thereafter, namely, on March 26, 1936, a creditor of Venkatachalam Chettiar presented a petition under the Provincial Insolvency Act hereinafter referred to as the Act for adjudicating him an insolvent on the ground that the transfer of the decree to Meenakshi Achi was a fraudulent preference and as such an act of insolvency. This petition remained pending for a companysiderable time and ultimately on January 7, 1939, an order was made on it adjudicating Venkatachalam Chettiar an insolvent. By that order respondent No. 1, the Official Receiver of Ramanathapuram, was appointed the receiver in insolvency and the insolvents estate vested in him. This order was based on the finding that the transfer of the decree by Venkata- chalam Chettiar to Meenakshi Achi was a fraudulent preference and an act of insolvency. On January 26, 1942, the receiver made an application in the insolvency proceedings for an order annulling the transfer of the decree by the insolvent to Meenakshi Achi and on this application an order was made on April 9, 1943, under s. 54 of the Act annulling that transfer. In the meantime, Meenakshi Achi had made two applications for execution of the decree as the assignee of -it and a reference to them is necessary. The first of these applications was made on December 14, 1936, for an order recognising her as the assignee of the decree and for its execution against some of the judgment-debtors. This application was disposed of by an order made on September 27, 1937, recognising her right to execute the decree as the assignee and directing a certain companypromise made presumably with the judgment debtors companycerned, to be recorded. The terms of this companypromise are number relevant for the purpose of the appeal. Thereafter, on August 2, 1940, Meenakshi Achi as the assignee of the decree made another application for its execution and this application was disposed of by an order made on September 30, 1940, dismissing it for default of prosecution. It will be remembered that it was after these applications and the orders thereon had been made that the order annulling the assignment of the decree to Meenakshi Achi was passed. After the order annulling the transfer of the decree to Meenakshi Achi had been made, the, receiver companysidering himself then entitled to the decree, made an application for its execution on September 27, 1943. It is this application which has given rise to the present appeal. The executing companyrt dismissed the application as having been made beyond the time prescribed by the Limitation Act. On appeal, the High Court at Madras set aside the order of the executing companyrt and held that the application was within time. Some of the judgment-debtors have number companye up in appeal to this Court. The appeal is companytested by the receiver, the respondent No. 1. The other respondents among whom are the remaining judgment-debtors or their successors in interest, have number appeared. Applications for execution like the present one are governed by art. 182 of the Limitation Act. That article provides a period of three years within which the application must be made. The article prescribes different points of time for different cases from which the period is to companymence running. The first point of time so prescribed is the date of the decree. The fifth point of time prescribed is expressed in these words Where the application next hereinafter mentioned has been made the date of the final order passed on an application made in accordance with law to the proper companyrt for execution The question for determination is whether the fifth point of time applies to the receivers application for execution. If it does number, the application must be held to have been made out of time, while if it does, the application would number be barred by limitation. The receiver companytends that the two applications by Meenakshi Achi were applications made in accordance with law to the proper companyrt for execution within the meaning of the article and his application was within time as it had been made within three years of the date on which the final order on Meenakshi Achis last application was made. It is said on behalf of the appellants that in view of the orders in the insolvency proceedings it must be held that she was number entitled to the decree on any of the dates on which she applied for its execution and that her applications were therefore incompetent and number in accordance with law. The appellants put their companytention in several ways. It is first said that the order annulling the assignment of the decree to Meenakshi Achi related back to the date of the assignment with the result that it has to be deemed as if she had never been entitled to the decree and that, therefore, the applications for execution by her were number companypetent and hence were number in accordance with law. We think this companytention is wholly unfounded. We will assume for the purpose of the present case that when an order is made tinder s. 54 of the Act annulling a transfer, the transfer stands annulled as from the date it was made. But even so, the transfer stands till it is annulled and therefore, till then, the transferee hag all the rights in the property transferred. So long as the transferee had such rights he was companypetent to exercise them and such exercise would be legal and fully in accordance with law. The fact, if it be so, that the transfer on annulment, becomes void as from the date of the transfer cannot turn the exercise of a right under the transfer, made prior to the annulment and which was legal when made, illegal. Meenakshi Achi had hence full legal companypetence to execute the decree, till the transfer of it to her was annulled. Her two applications for execution of the decree were, therefore, fully in accordance with law when they had been made and that is all that art. 182 requires. Next, it is said that the provisions of sub-ss. 2 and 7 of s. 28 of the Act make Meenakshi Achis two applications for execution incompetent in law. These provisions have number to be companysidered. Sub-section 2 says that upon the making of an order of adjudication the whole of the property of the insolvent shall vest in the receiver and sub-s. 7 says that an order of adjudication shall relate back to and take effect from ,the date of the presentation of the petition on which it is made. It is said that under these provisions, the assets of the insolvent in this case, including the decree under execution, became vested in the receiver on March 26, 1936, when the petition for adjudicating him an insolvent had been presented, and companysequently, the two applications for execution by Meenakshi Achi which had been made after that date were incompetent and number in accordance with law. It seems to us that this companytention also is fallacious. These sub-sections cannot have the effect of vesting the decree in the receiver till its transfer to Meenakshi Achi had been annulled. Till then it was number a part of the insolvents estate. The annulment, as we have earlier pointed out, was made under s. 54 of the Act. That section provides that certain transfers of property by the insolvent would be deemed fraudulent and void as against the receiver in insolvency and shall be annulled by companyrt. It is obvious that a transfer liable to be annulled under this section remains a perfectly valid transfer till it is annulled. If it had become void automatically on an order for adjudication being made, there would be numberneed to provide for its annulment by companyrt. It would follow that Meenakshi Achi was legally possessed of the decree and companypetent to apply for its execution till the transfer of the decree to her was annulled under s. 54. It is then said that though it may generally be that a transfer liable to be annulled under s. 54 remains valid till it is annulled, that is number so where the transfer is the act of insolvency upon which the order of adjudication is founded, for, in such a case the order itself annuls the transfer. So, it is said that as the order of adjudication in this case was founded upon the transfer of the decree to Meenakshi Achi, that transfer became annulled on the order being made on January 7, 1939, and the second application for execution by Meenakshi Achi was incompetent, It is true that if this in the companyrect view, then the receivers application for execution must be held to have been made beyond the time allowed, for, it had been made more than three years after the final order on the first application for execution by Meenakshi which is the only order on which the receiver can on this basis rely for resorting to the fifth point of time fixed by art. 182. Now this argument is based solely on the decision of the Judicial Committee in Mahomed Siddique Yousuf v. Official Assignee of Calcutta 1 which it is said held that where a transfer is the act of insolvency on which the order of adjudication is founded, that order itself has the effect of annulling the transfer. We think this case has been misunderstood. We find numberhing in it to lead to the view that an order of adjudication founded on an act of insolvency companystituted by a transfer of property amounting to a fraudulent preference, itself and without more annuls that transfer. That was a case decided under the Presidency towns Insolvency Act. In that case one of the acts of insolvency on which the order of adjudication had been founded was a transfer by the insolvent of a certain decree in his favour to the appellant, which was held to have been a fraudulent preference. The transferee was number a party to the order of adjudication. The official assignee, that is, the receiver in insolvency, applied to have that transfer annulled. It was companytended on behalf of the official assignee before the judge in insolvency in the High Court that the order of adjudication holding the transfer to be a fraudulent preference was companyclusive and binding on the transferee though he was number a party to the insolvency petition. It was said that had been held in Ex- parte Learoyd 2 which turned on the English Bankruptcy Act, 1869, the terms of which were similar to the relevant provisions in the Presidency-towns Insolvency Act. The learned judge felt some difficulty in view of a decision of the Madras High Court to which it is unnecessary to refer, whether the principle of the 1 1943 L.R. 70 I.A. 93. 2 1878 10 Ch. D. 3. English decision applied to a case under the Presidency towns Insolvency Act. He, therefore, went into the facts and came to the companyclusion that the transfer amounted to a fraudulent preference and thereupon made an order annulling it. On appeal the appellate Judges of the High Court expressed some doubt whether the intent to prefer was in fact proved but they were both of opinion following Ex- parte Learoyd 1 that the order of adjudication was companyclu- sive and companyld number be disputed. They hold that this was so though the transferee was number a party to the order of adjudication. In that view of the matter the appellate Judges felt that there was a decision binding on the transferee that the transfer was void as a fraudulent preference and they thereupon annulled the transfer as a matter of companyrse. The judgments in the High Court are reported in 45 C.W.N. 441. The transferee who was number a party to the insolvency petition, then asked for an extension of time to prefer an appeal from the order of adjudication but this was refused. Then the matter was taken up to the Judicial Committee in further appeal. The Judicial Committee held that the appellate Judges of the High Court, were right in their view that the principle of Ex parts Learoyd 1 , applied to cases under the Presidency-towns Insolvency Act, but they thought that in the circumstances of the case the order of the appellate judges refusing to extend time for the transferee to appeal from the order of adjudication was number justified and set it aside and extended the time to appeal. In order, however, to make the order in the companytemplated appeal, should it succeed, effective, they also set aside the order annulling the transfer though in their view it was plainly right . This would appear from their observations at p. 99 of the report It is plain that an appeal against the adjudication order would be useless while the orders stand in this independent proceeding declaring the transfer void because of the adjudication order itself. On the other hand, the decision of the High Court avoiding the transfer is plainly right while the adjudication 1 1878 10 Ch. D. 3. order stands and the appellant as a companydition of the extension of time must pay, as he has offered to do, the companyts thrown away. And at p. 100 they said, The order is without prejudice to the right of the official assignee, if he is so advised, to make a further application to have the transfer declared void. It is therefore abundantly clear that all that the Judicial Committee held in Mahomed Siddique Yousufs case 1 was that in a case under the Presidency-towns Insolvency Act, when the act of insolvency upon which an order of adjudication is founded is a transfer amounting to a fraudulent preference, the transferee cannot so long as the order of adjudication stands, question that finding, namely, that the transfer was a fraudulent preference and that, therefore, in an application by the official assignee to have that transfer annulled on the ground that it was a fraudulent preference, the order of adjudication is companyclusive proof that the transfer was by way of a fraudulent preference and it was number open to the transferee to lead evidence to prove that the transfer was number a fraudulent preference. In such a case therefore the order of annulment had to be made as a matter of companyrse on proof of the order of adjudication. The Judicial Committee did number hold that in such a case the order of adjudication itself annulled the transfer and numberseparate order of annulment was required for the purpose. In fact, it is obvious that they thought that a separate order annulling the transfer would be necessary even in such a case for otherwise they would number have stated that the decision of the High Court avoiding the transfer is plainly right number while setting aside the order annulling the transfer reserved the right of the official assignee, should the occasion arise, to make a further application to have the transfer declared void. The case therefore does number support the proposition for which it has been cited. On the companytrary, it clearly proceeds on the basis that even where the order of adjudication is based on an act of insolvency companystituted by a 1 1943 L.R. 70 I.A. 93. transfer of property found to be a fraudulent preference, the transfer stands till it is set aside. In our view, this is the companyrect position and numberhing to the companytrary has been brought to our numberice. An argument had been raised at the bar that under the Provincial Insolvency Act an order of adjudication has -not that binding force which Mahomed Siddique Yousufs case 1 held it had under the Presidency-towns -Insolvency Act. It was said that this was so because the terms of the two Acts were dissimilar. We do number think it necessary to express any opinion on this question. We have discussed Mahomed Siddique Yousufs case 1 only to show that it does number support the proposition for which it was cited. It is un- necessary for us to say whether it will govern a case Under the Provincial Insolvency Act or what the effect of the dissimilarity pointed out in the terms of the two Acts is. That question is number before us. There remains one other point to deal with. It is said that the official receiver was number entitled to take advantage of the applications for execution made by Meenakshi Achi as he had number been claiming under her but had actually claimed against her. This companytention is equally unfounded. Article 182 does number say that numberadvantage of a previous application can be taken for the purposes of saving the bar of limita- tion, unless it had been made by a person under whom the applicant in a later application, which is said to be barred by limitation, claimed. All that the article companytemplates is an application for execution of a decree made within three years of the final order on a previous application made in accordance with law for the execution of the same decree. That being so, we must reject this companytention of the appellants also. In view of what we have already said, it becomes unnecessary to deal with the other points raised at the bar. In the result, we think that the appeal should be dismissed and we order accordingly. The appellant must pay the companyts of this appeal. 1 1943 L.R. 70 I.A. 93. SUBBA RAO J.-This appeal raises a question of limitation. There is numberdispute about the facts. On May 9, 1935, one Venkatachalam Chettiar obtained a companypromise decree against the appellants and respondents 2, 3 and 4 and predecessors in interest of respondents 5 and 6 in A. S. No. 226 of 1930, on the file of the High Court of Madras. Under the decree the defendants were directed to pay the plaintiffs therein a sum of Rs. 1,10,101.4-0 together with interest at 3 per cent. per annum in certain instalments, the last of the instalments being payable on May 30, 1942. The decree also provided that in the event of a default in payment of any one of the instalments, the entire decree amount would become payable. On February 27, 1937, one Visvanathan Chettiar obtained a decree against the said Venkataclialam Chettiar in 0. S. No. 22 of 1936, on the file of the Court of Subordinate Judge, Devakottai, for a sum of Rs. 33,000. The suit ending in the above decree was filed on January 29, 1936. On February 3, 1936, Venkatachalam Chettiar executed a deed of assignment transferring the decree obtained by him in C. S. No. 14 of 1926 to his mother, Meenakshi Achi, for companysideration. On March 26, 1936, Visvanathan Chettiar filed 1. P. No. 10 of 1936 in the Court of Subordinate Judge, Devakottai, for adjudicating Venkata chalam Chettiar an insolvent on the ground that the transfer of the decree in favour of Meenakshi Achi was an act of insolvency. On December 14, 1936, the assignee, Meenakshi Achi, filed E.P. No. 37 of 1937 for recognition of the assignment in her favour and for execution of the decree. The judgment- debtors did number object either to the recognition of the assignment of the decree or the execution thereof The said Visvanatban Chettiar intervened in the execution petition and applied in E.A. No. 817 of 1937 for stay of execution of the decree on the ground that he had filed an insolvency petition against the decree-holder and also on the ground that the said assignment was numberinal. The learned Subordinate Judge disallowed the objection of the creditor, recognised the assignment, and permitted the assignee- decree-holder to proceed with the execution of the decree. On September 27, 1937, a settlement was entered into between the assignee-decree-holder and the judgment debtors and the said execution petition was closed. On January 7, 1939, Venkatachalam Chettiar was ,,adjudicated insolvent on the ground that the assignment of the said decree by him in favour of his mother, Meenakshi Achi, was an act of insolvency, whereupon his properties vested in the first respondent, the Official Receiver, Ramanathapuram at Madurai. On August 2, 1940, the assignee-decree-holder filed another execution petition, E.P. No. 243 of 1940, and it was struck off on September 30, 1940. On January 26, 1942, the Official Receiver filed I.A. No. 20 of 1942 in 1. No. 10 of 1936 in the Court of the Subordinate Judge, Devakottai, for setting aside the assignment, and by order dated April 9, 1943, the assignment was set aside by the Court on the ground of fraudulent preference within the meaning of s. 54 of the Provincial Insolvency Act, 1920, hereinafter called the Act. On September 27, 1943, the Official Receiver filed a fresh execution petition, E.P. No. 90 of 1944, for executing the decree. It was alleged by the appellants and the respondents 2 to 6, inter alia, that the said execution petition was barred by limitation on the ground that the two earlier execution petitions were number in accordance with law within the meaning of art. 182, cl. 5, of the Limitation Act. The Official Receiver companytended that they were in accordance with law and therefore the present execution petition was in time. He further pleaded that the present execution petition was also saved from the bar of limitation by the payments made by the judgment-debtors to Meenakshi Achi, and that, in any event, the decree in respect of the last three instalments was number barred by limitation. The learned Subordinate Judge rejected the companytentions of the Official Receiver and held that the execution petition was barred by limitation. The Official Receiver preferred an appeal against the said order of the Subordinate Judge to the High Court of Madras. Govinda Menon and Basheer Ahmed Sayeed, JJ., of the said High Court came to the companyclusion that the earlier execution petitions, were in accordance with law and, therefore, the present execution petition was within time. They also expressed the view that the payments made by the judgment-debtors to Meenakshi Achi were valid payments and therefore they also saved the bar of limitation. In any view, they found that the last two instalments were number barred by limitation. On their findings, the learned judges of the High Court set aside the order of the learned Subordinate Judge and remanded the execution petition to the Court of the Subordinate Judge, Devakottai, for taking steps in furtherance of execution. The present appeal to this Court was filed against the said order of remand. Learned Counsel for the appellants companytended that the execution petitions, E.P. No. 37 of 1937 and E.P. No. 243 of 1940, were number in accordance with law for the following reasons 1 The order dated April 9, 1943, annulling the assignment of the decree by Venkatachalam Chettiar in favour of his mother, Meenakshi Achi, related back to the date of the transfer, i.e., February 3, 1936, and, therefore, E.P. No. 37 of 1937, which was filed on December 14, 1936 and E. No. 243 of 1940 which was filed on August 2, 1940, were ineffective to save the bar of limitation, as on the dates they were filed Meenakshi Achi had numbertitle in the decree 2 the order of adjudication dated January 7, 1939, was based on the finding that the said assignment of the decree was an act of fraudulent preference and that the order related back to the date of the filing of I. P. No. 10 of 1936 on March 26, 1936, and, therefore, the two execution petitions filed thereafter were filed by a person without title, with the result that the said two petitions were number in accordance with law 3 assuming that the said two execution petitions were in accordance with law, the Official Receiver neither claims under, number represents, the assignee-decree-holder, and, therefore, he has numberlocus standi to file the present execution petition 4 payments made by the judgment-debtors to Meenakshi Achi, who had numbertitle in the decree, companyld number save the bar of limitation and 5 as Meenakshi Achi in her execution petitions, by exercising her option, claimed the entire decree amount, the Official Receiver cannot number claim that the last two instalments are within time. At the outset it may be stated that it would be sufficient if we companysider the objections of the appellants in regard to P. No. 243 of 1940, for, if that was number in accordance with law, the present execution petition would be barred by limitation. The validity of E. P. No. 37 of 1937 was also questioned on the same -grounds of attack taken against the later execution petition. The relevant part of the Limitation Act is art. 182 and it reads ----------------------------------------------------------- Description of Period of Time from which period application Limitation begins to run ----------------------------------------------------------- For the execution Three years or, 5. where the applic- of a decree or where a certified tion next hereinafter order of any companyy of the decree mentioned has been m- Civil Court number or order has been ade the date of the provided for by registered, Six final order passed on article 183 or Years. an application made in by section 48 of accordance with law to the companye of Civil the proper Court for Under this article the latest execution petition should have been filed within three years from the date of the final order passed on an application made in accordance with law to the proper Court of execution. Taking first the second companytention of the learned Counsel for the appellants, the question may be posed thus Whether the execution petition, P. No. 243 of 1940, filed on August 2, 1940, by Meenakshi Achi after Venkatachalam Chettiar was adjudicated insolvent on January 7, 1939, was one in accordance with law? If the order of adjudication of Venkatachalam Chettiar on the ground that the assignment of the decree made by him in favour of Meenakshi Achi was an act of insolvency ex proprio vigore annul the transfer in her favour, the execution petition filed by her after the said order of adjudication would number be one filed in accordance with law. On the other hand, if the assignment of the decree companytinued to be good till it was annulled on an application filed by the Official Receiver, which was done in the present case on April 9, 1943, the execution petition, subject to another argument that I would companysider at a later stage, would be one filed in accordance with law. What then is the legal effect of such an order of adjudication ?The question in the main falls to be decided on a true companystruction of the relevant provisions of the Act. Section 6 of the Act defines the act of insolvency it enumerates eight acts of insolvency, and one of them is a transfer made by a debtor which would be void as a fraudulent preference if he were adjudicated insolvent. Section 7 enables a creditor or a deter to present an insolvency petition for adjudicating the debtor an insolvent. Section 9 lays down the companyditions on which a debtor may petition. Section 13 prescribes the particulars a creditor has to give in his petition, and one of the particulars to be given is the act of insolvency companymitted by the debtor. When an insolvency petition is admitted, s. 19 provides that numberice should be given to creditors in such manner as may be prescribed, and, when the debtor is number the petitioner, numberice of the order admitting the petition should be served on the debtor. On the date fixed for hearing, the Court should require proof of the matters mentioned under s. 24 of the Act it enables the Court to examine the debtor and the creditors and take the evidence adduced by them. After making the, necessary enquiry, the Court may dismiss the petition or make an order of adjudication. On the making of the said order of adjudication, the whole property of the insolvent would vest in the Court or in the Receiver appointed under the Act, and the said property becomes divisible among the creditors. Under sub-s. 7 of s. 28 the order of adjudication shall relate back to, and take effect from, the date of the presentation of the petition. Under s. 30 numberice of an order of adjudication stating the name, address and description of the insolvent, the date of adjudication, the period within which the debtor should apply for his discharge and the Court by which the adjudication is made, should be published in the Official Gazette and in such manner as may be prescribed. It will be seen from the aforesaid provisions that till an order of adjudication is made the person to whom the insolvent transferred his property does number companye into the picture at all. The purchaser is neither a party to the proceedings number any numberice is given to him. It would, therefore, be companytrary to all ,principles of natural justice to hold that the finding arrived at in regard to an assignment of a property by the insolvent in favour of a third party behind his back, is binding on him. If the legislature intended that the order should have that effect, it would have provided for personal, or, at any rate, public numberice to the purchasers, or would have given in express terms such a binding effect and the fact that it did number do so is a clear indication of the legislative intention that an incidental finding was number intended to have such a far-reaching effect. On the other hand, the Act makes ample provision for setting aside such transfers. Sections 53 and 54 of the Act enable the Official Receiver to have voluntary transfers made within two years of the insolvency petition and that made in fraudulent preference of one creditor over another within three months from the date of the petition annulled by the Court. If the legislature intended to exclude a transfer companystituting an act of insolvency from the operation of these provisions, it would have introduced a proviso to that effect. Therefore, unless such a transfer is duly annulled in the manner prescribed, the transfer would be valid. That this is the intention of the legislature is also made clear by the other provisions of the Act vis-avis transfers. The Act provides for three stages 1 Transfers made before the presentation of the insolvency petition 2 transfers made after the presentation of the petition and before the order of adjudication and 3 transfers made after adjudication. A transfer made after adjudication is number binding on the Receiver. A transfer by an insolvent after the filing of the petition is also number binding on the Receiver subject to a protection clause. A purchase in good faith under a sale in execution s. 51 3 and a transfer inter vivos in good faith for valuable companysideration, A transfer before the filing of the petition is binding on the Receiver unless it is annulled under ss. 53, 54 or 54-A of the Act. The scheme of the Act in regard to transfers clearly demonstrates that transfers before the filing of the petition are good unless they are annulled in the manner prescribed in the Act and even the doctrine of relating back of the order of adjudication does number reach them as they fall on the other side of the line. If it was the intention of the legislature that the said order by its own force should declare the transaction void, it would have fixed the date of the transfer as the datum line instead of the date of the filing of the petition. It appears to me that this was designedly done to give an opportunity to the party affected to defend his title when the Official Receiver filed an application to annul the transfer. Sections 53 54 and 28 must be reconciled and they can be reconciled without doing violence to the language of the said sections if the order of adjudication is companyclusive only in regard to the status of the insolvent it declares and the transfer, though it formed the basis of the adjudication, so far as the transferee is companycerned, companytinues to be good till set aside. Strong reliance is placed upon the judgment of the Judicial Committee in Mohamed Siddique Yousuf v. Official Assignee of Calcutta 1 in support of the companytention that the finding that the transfer of the decree in favour of Meenakshi Achi was an act of insolvency was binding on the transferee, though she was number a party to the adjudication proceedings. That decision turned upon the relevant provisions of the Presidency towns Insolvency Act, 1909, and the companyresponding provisions of the Bankruptcy Act of 1869. That decision cannot apply to a situation created under the Provincial Insolvency Act, unless the provisions of said Act are pari materia with those of the Presidencytowns Insolvency Act and the Bankruptcy Act. A companyparative study of the three sets of provisions by placing them in juxtaposition will facilitate a better understanding of the problem. 1 1943 L.R. 7o I.A. 93. Bankruptcy Act, 1869 S. 10 A companyy of an order of the Court adjudging the debtor to be bankrupt shall be published in the London Gazette, and be advertised locally in such manner if any as may beprescribed, and the date of such order shall be the date of the adjudication for the purposes of this Act, and the production of a companyy of the Gazette companytaining such order as aforesaid shall be companyclusive evidence in all legal proceedings of the debtor having been duly adjudged a bank- rupt, and of the date of the adjudication. S. 11 The bankruptcy of a debtor shall be deemed to have relation back to and to companyimence at the time of the act of bankruptcy being companypleted on which the order is made adjudging him to be bankrupt or if the bankrupt is proved to have companymitted more acts of bankruptcy than one, to have relation back and to companymence at the time of the first of the acts of bankruptcy that may be proved to have been companymitted by the bankrupt within twelve months next preceding the order of adjudication but the bankrcptcy shall number relate to any prior act of bankruptcy, unless it be that at the time of companymitting such prior act the bankrupt was indebted to some creditor or creditors in a sum or sums sufficient to support a petition in bankruptcy, and unless such debt or debts are still remaining due at the time of the adjudication, The Presidency-towns Insolvency Act, 1909 S. 116 6 1 A companyy of the Official Gazette companytaining any numberice inserted in pursuance of this Act shall be evidence of the facts stated in the numberice. A companyy of the Official Gazette companytaining any numberice of an order of adjudication shall be companyclusive evidence of the order having been duly made, and of its date. S. 5I The insolvency of a debtor, whether the same takes place on the debtors own petition or upon that of a creditor or creditors, shall be deemed to have relation back to and to companymence at-- a the time of the companymission of the act of insolvency on which an order of adjudication is made against him, or b if the insolvent is proved to have companymitted more acts of insolvency than one, the time of the first of the acts of insolvencyproved to have been companynmited by the insolvent within three months next preceding the date of the presentation of the insolvency petition Provided that numberinsolvency petition or order of adjudication shall be rendered invalid by reason of any act of insolvency companymitted anterior to the debt of the petitioning creditor. The Provincial Insolvency Act, 1920 S. 30 Notice of an order of adjudication stating the name, address and description of the insolvent, the date of the adjudication, the period within which the debtor shall apply for his discharge, and the Court by which the adjudication is made, shall be published in the Official Gazette and in such other manner as may be prescribed. S. 28 7 An order of adjudication shall relate back to, and take effect from, the date of the presentation of the petition on which it is made. Bankruptcy Act, 1869 Nil The Presidency-towns Insolvency Act, 1909 S.56 1 Every transfer of property, every payment made, every obligation incurred, and every judicial proceeding taken or suffered by any person unable to pay his debts as they become due from his own money in favour of any creditor, with a view of giving that creditor a preference over the other creditors, shall, if such person is adjudicated insolvent on a petition presented within three months after the date thereof, be deemed fraudulent and void as against the Official assignee. This section shall number affect the rights of any person making title in good faith an for valuable companysideration through or under a creditor of the insolvent. The Provincial Insolvency Act, 1920 S.54 1 Every transfer of property, every payment made, every obligation incurred, and every judicial proceeding taken or suffered by any person unable to pay his debts as they become due from his own money in favour of any creditor with a view of giving that creditor a preference over the other creditors, shall, if such person is adjudged insolvent on a petition presented within three months after the date thereof, be deemed fraudulent and void as against the receiver, and shall be annulled by the Court. This section shall number affect the rights of any person who in good faith and for valuable companysideration has acquir- ed a title through or under a creditor of the insolvent. With some difference in. the phraseology, with which we are number companycerned, Ss. 116 and 51 of the Presidencytowns Insolvency Act are,-in terms similar to the companyresponding sections, ss. 10 and II, of the Bankruptcy Act. Section 10 of the Bankruptcy Act and s. 116 of the Presideticy-towns Insolvency Act make the companyy of the Official Gazette companytaining the order of adjudication companyclusive evidence of the date of adjudication and the fact that the order of adjudication was duly made. But s. 30 of the Provincial Insolvency Act only enjoins that the numberice of the order of adjudication with the necessary particulars should be published in the Official Gazette and in such manner as may be prescribed but a companyy of the said Gazette companytaining the said numberification is number made companyclusive evidence either of the facts mentioned therein or of the fact that adjudication has been duly made. Section 51 of the Presidency-towns Insolvency Act is in terms similar to that of s. II of the Bankruptcy Act, and under both the sections the insolvency of a debtor relates back to the time of the companymission of the act of insolvency on which the order of adjudication has been made against him. But under s. 28 7 of the ,Provincial Insolvency Act, the order of adjudication relates back to and takes effect from the date of the presentation of the application on which it is made. Under s. 56 of the Presidency-towns Insolvency Act, transfer of a property in favour of a creditor with a view to give preference to him over other creditors shall be deemed fraudulent and void as against the Official Assignee, whereas under s. 54 of the Provincial Insolvency Act, the said transfer has to be annulled by the Court. There are, therefore, essential differences in the structure of the scheme between the three Acts in the matter of adjudication. With this background let us look at the Privy Council decision in Mohomed Siddique Yousufs case, 1 to ascertain the basis of that decision. The facts in that case were On January 20, 1939, the insolvent assigned to the appellant a decree obtained by him for companysideration. On April 19, 1939, the petitioning creditor filed a petition in the High Court for the adjudication of the insolvent as such. One of the acts of insolvency alleged was the said assignment of the decree in, favour of the appellant. On June 13, 1939, an adjudication order was made against the insolvent. No one appeared except the petitioning creditor, and the order -recited that the insolvent had companymitted each of the acts of insolvency alleged in the petition. On November 23, 1939, the Official Assignee gave numberice of motion in the Insolvency Court for a declaration that the indenture of assignment dated January 20, 1939, should be declared void as against the Official Assignee and that the transfer should be set aside. The Judge in Insolvency held on the merits that the said transfer was void under s. 56 of the Presidency-towns Insolvency Act. On appeal the High Court held that the order of adjudication was companyclusive evidence against the appellant that the assignment was a fraudulent preference, and on that 1 1943 L.R. 70 I.A. 93. ground it declared the transfer void. On further appeal, the Privy Council agreed with the High Court. Relying on the decision in Ex varte Learoyd 1 , a decision on analogous provisions of the Bankruptcy Act, the Privy Council made the following observations at p. 98 The provisions of the Presidency-towns Insolvency Act, 1909, are also in similar terms, and their Lordships feel numberdoubt that the principles of the English decision are as valid in India as in England. No doubt it is anomalous that a decision affecting the right of a third party should be companyclusively determined against him in his absence, and even without numberice to him, but the words of the section and the importance of maintaining the status of the debtor as determined by an order of adjudication, and the necessity of securing the stability of the administration of the debtors estate once his status has been fixed, have been justly held to outweigh the companysideration of hardship to the private citizen. But the Privy Council came to the companyclusion, on the facts that a case was made out for the -High Court for excusing the delay in preferring the appeal against the order of adjudication. On that view they set aside the order of the High Court and made the following observations for its guidance, at p. 99 It may be that if the appellant takes advantage of the extension of time and appeals, the High Court may adopt the procedure in Ex parte Tucker 2 and companytent themselves with striking out the act of bankruptcy companyplained of, and leaving the official assignee to make a fresh application without themselves determining the facts. This decision decides three points, namely i having regard to the express provisions of the Presidency-towns Insolvency Act, and for maintaining the status of the debtor and the stability of the administration of his estate, the decision affecting the rights of a third party though made behind his back, would be binding on him ii an appeal can be entertained against the, 1 1878 10 Ch.D 3. 2 1879 12 Ch. D. 308. order of the adjudication at the instance of the trans. feree, and, if necessary, by excusing the delay in preferring the appeal and iii in such an appeal, the High Court may strike out one of the acts of insolvency, i.e., the transfer in favour of the appellant, and leave it to the Official, Assignee to make a fresh application. Though the principles underlying the relevant provisions of the Act were expounded, the decision mainly rested on the express provisions of the Presidency-towns Insolvency Act. Nor did the Privy Council hold that when there was an order of adjudication on the basis of an act of insolvency, there was numbernecessity on the part of the Official Assignee to take out an application for setting aside the transfer companystituting the act of insolvency. Though it is number very clear, it appears to me that what the Privy Council stated was that in such an application the decision on the transfer forming part of the order of adjudication is companyclusive evidence of the invalidity of the transfer. To put it differently, in such an application the Official Assignee need number prove afresh that the transfer was a fraud on creditors or an act of fraudulent preference. That decision was mainly based upon Ex parte Learoyd 1 , which in its turn was founded upon the interpretation of ss. 10 and 11 of the Bankruptcy Act-sections companyresponding to ss. 116 and 51 of the Presidency-towns Insolvency Act. A scrutiny of that decision, therefore, will disclose the raison detre of the decision of the Privy Council. There, on August 30, 1877, an insolvent executed in favour of George Payne a bill of sale of his household furniture etc., by way of security for companysideration. The goods remained in the apparent possession of the mortgagor until January 1, 1878, when Payne removed them. On January 3, 1878, a bankruptcy petition was presented against the insolvent by a creditor, relying upon an alleged act of bankruptcy, namely, that the insolvent, being a trader, departed from his dwelling-house on December 31, 1877. On January 3, 1878, an order of adjudication was made on the petition upon proof of the said act of bankruptcy, and that 1 1878 10 Ch. D. 3. order was advertised in the usual way in the London Gazette. On January 8, 1878, the goods removed by Payne were sold on his behalf. The trustees in the Bankruptcy claimed the proceeds of the sale, and the Judge of the County Court ordered the payment. On appeal Bacon, C. J., allowed the appeal on the ground that it had number been established that there was an act of insolvency before Payne took possession of the goods. On further appeal, the Court of Appeal set aside the judgment of Bacon, C.J., on the ground that by virtue of ss. 10 and 11 of the Bankruptcy Act, 1869, a bill of a sale holder is companyclusively bound by the adjudication so long as it stands, and cannot dispute that the act of bankruptcy on which the adjudication professedly proceeded was in fact companymitted, and that the trustees title related back to that act of bankruptcy James, L.J., after a brief survey of the historic background of the Bankruptcy Act, based his judgment mainly on the companystruction of the provisions of ss. 10 and I I of the Bankruptcy Act. The learned Judge observed at p. 8 A man cannot be I duly adjudged a bankrupt, unless the great requisite of all exists, that he has companymitted an act of bankruptcy. That is the capital offence of which he must have been guilty before he can be duly adjudged a bankrupt. That he has been duly adjudged a bankrupt, necesssarily involves the previous companymission of an act of bankruptcy. The mere fact that an adjudication has been made companyld have been proved without the aid of sect. 10. That section may, however, only involve this, that some act of bankruptcy had been companymitted before the adjudication was made. But then companyes sect. II, which has numberoperation at all as between the bankrupt and the trustee. The bankrupt has numberrights whatever all his rights have been transferred to the trustee. The mere fact that sect. 1 1 is dealing with the relation back of the trustees title, shews that it is dealing with the rights of third persons, and number merely with the rights of the bankrupt and persons indebted to him Then sect. 11 goes on to provide that, by way of enlargement of the trustees title, he may go behind the act of bankruptcy on which the adjudication was founded, and may, under certain circumstances and subject to certain limitations, prove that other earlier acts of bankruptcy have been companymitted, and if this is done the trustees title is to relate back to the earliest act of bankruptcy which is proved to have been companymitted within twelve months before the adjudication. This, however, is to be proved by evidence, whereas the act of bankruptcy on which the adjudi- cation is founded is proved by the production of the adjudication itself. It seems to me to be impossible to evade the words of these sections. Baggallay, L. J., also, after emphasizing on the words duly made in s. 10 of the Bankruptcy Act, remarked on the scope of s. 11 thus, at p. 10 But then companyes sect. II, which, I think, if more was needed, makes the adjudication companyclusive on third persons that the act of bankruptcy on which it was founded was really companymitted. Thesiger, L. J., also said much to the same effect, at P. 11 We start, therefore, with this, that we are bound to hold companyclusively that a due adjudication was made on the 3rd January. It must, therefore, have been founded upon a proper act of bankruptcy. Then sect. 11 goes still further, and it is important to companypare it with the provisions companytained in the prior Bankruptcy Acts. Sects. 234 and 235 enabled third persons to dispute the act of bankruptcy upon giving numberice of their intention so to do. That provision is swept away by the Act of 1869, and in language clear and distinct the Legislature has said by sect. II that I the bankruptcy of a debtor shall be deemed to have relation -back to and to companymerce at the time of the act of bankruptcy being companypleted on which the order is made adjudging him to be bankrupt. From the aforesaid extracts from the judgments, it is manifest that the decision turned upon the express provisions of ss. 10 and 11 of the Bankruptcy Act. Under s. 10 of that Act, the gazette companytaining the order was companyclusive evidence that the order of adjudication was duly made on the basis of an act of insolvency and s. 11 fixed the datum line for the companymencement of the trustees title from the act of bankruptcy. The former section made the order of,., adjudication companyclusive against third parties and the latter section vests the title of the property companycerned in the official receiver from the date of the act of insolvency. This judgment, therefore, cannot be applied to an Act which differs in all respects-from the relevant provisions of ss. 10 and 11 of the Bankruptcy Act on the basis of which that judgment was given. In the Provincial Insolvency Act, neither the order of adjudication is companyclusive evidence that it has been duly made, number the trustees title dates back to the act of insolvency on which the adjudication is founded. I am, therefore, of the view that neither the decision in Ex parte Learoyd 1 based on the provisions of the Bankruptcy Act, 1869, number the Privy Council decision in Mahomed Siddique Yousuf v. Official Assignee of Calcutta 2 based upon the provisions of the Presidencytowns Insolvency Act, has any bearing in companystruing the relevant provisions of the Provincial Insolvency Act. A similar view was expressed by a Full Bench of the Madras High Court in The Official Receiver, Guntur v. Narra Go v. Narra Gopala Kri8hnayya 3 and by a Full Bench of the Nagpur High Court in D. G. Sahasrabudhe v. Kila Chand Deochand Co., Bombay 4 . Both Courts held that the decision of the Privy Council did number apply to a case under the Provincial Insolvency Act and that a transferee, who was number a party to the adjudication proceeding, companyld companytend in subsequent proceedings for annulment that his transfer was good numberwithstanding that the order of adjudication was based on the alleged transfer as being an act of insolvency. I accept the companyrectness of the said two decisions. If so, it follows that the order of adjudication made in the present case did number by its own force divest the title of Meenakshi Achi and vest it in the official receiver and that she companytinued to be the transferee of the decree at the time 1 1878 10 Ch. D. 3. 2 1943 L.R. 70 I.A. 93. I. L. E. 1945 Mad. 541 4 1.L.R. 1947 Nag. 85. when she filed the second execution petition, E.P. No. 243 of 1940. For the same reasons, when E.P. No. 37 of 1937, was filed, Meenakshi Achi had subsisting title to the decree runder the transfer deed dated February 3, 1936, and, therefore the said execution petition was also in accordance with law. The next argument of the learned Counsel for the appellants is that the order of the Insolvency Court dated April 9, 1943, related back to the date of the transfer i.e., February 3, 1936, and that by the order of annulment, the transfer became void from its inception with the result that on the dates when the Execution Petitions Nos. 37 of 1937 and 243 of 1940 were filed Meenakshi Achi-had numbertitle to the decree, and, therefore, the said petitions were number filed in accordance with law. The answer to this companytention depends upon the true legal effect of the order of annulment of the transfer on the ground of fraudulent preference. That part of s. 54 of the Provincial Insolvency Act so far relevant to the present enquiry reads thus S. 54 1 Every transfer of property in favour of any creditor, with a view of giving that creditor a preference over the other creditors, shall, if such person is adjudged insolvent on a petition presented within three months after the date thereof, be deemed fraudulent and void as against the receiver, and shall be annulled by the Court. This section shall number affect the rights of any person who in good faith and for valuable companysideration has, acquired a title through or under a creditor of the insolvent. It is clear from the provisions of this section that a transfer of property by a debtor before insolvency in favour of a creditor giving him preference over other creditors is number absolutely void. As between the transferor and the transferee, the title in the property companyveyed passes from one to the other, but it is liable to be annulled at the instance of the receiver. This is because the Insolvency Act companyfers on the official ,receiver a title superior that of the insolvent enabling the former to get it annulled in the interest of the creditors. Sub-section 2 of that section also indicates that the-transfer is number void ab initio, for under that sub- section the rights of any person, who in good faith and for valuable companysideration acquired title through, or under a creator of the insolvent, are protected. If the transfer was ab initio void in the sense that it is a nullity, all the depending transactions should fall with it. Emphasis is laid upon the word void in s. 54 1 of the Act, but the said word in the companytext can only mean voidable, for it is made void only against the receiver and requires to be annulled by the Court. It follows from the aforesaid premises that such a transfer is valid till annulled in the manner prescribed by the provisions of the Provincial Insolvency Act. The legal effect of annulling a transfer under s. 53 of the Act was companysidered by a Division Bench,of the Madras High Court in The Official Receiver, Coimbatore v. Palaniswami Chetti 1 . In that decision, Devadoss, J., observed as under at p. 758 But till such a declaration is made by the Insolvency Court under section 53, the transaction is good and the mortgagee companyld proceed with the suit or with the execution of his decree against the insolvents property. Wallace, J., elaborated thus, at p. 764 Section 53 implies an attack by the Official Receiver on behalf the general body of creditors, and the remedy which he is entitled to get on proving his case is that the transfer is voidable against him and may be annulled by the Court it does number really affect the relationship of the transferor and transferee as mortgagor and mortgagee. For example, if the property is sold by the Official Receiver, and the creditors and companyts are fully paid out of the proceeds and there is a surplus remaining., that surplus belongs primafacie to the transferee and number to the transferor, and is his unless the transferor has by appropriate proceedings established his right to it The relationship between the mortgagor and mortgagee remains 1 1925 I.L.R. 48 Mad. 750. unaffected by any proceedings under section 53, and the mortgagee is entitled therefore to enforce his mortgage against the mortgagor except so far as proceedings under section 53 may have held the property mortgaged as assets of the mortgagor at the disposal of the general body of creditors. The observations of the learned Judges establish two propositions i that the transaction inter se between the debtor and transferee is good and ii it is number binding on the Official Receiver so far as it is necessary to protect the interests of the creditors. The decision in Amir Ahmad Saiyid Hasan 1 is also one laying down the legal effect of s. 53 of the Act. The learned Judges made the following observations in that case, at p. 903 It seems quite clear that if a transfer made by a debtor is wholly fictitious and bogus and numberinterest in the property passes to the transferee, then the transfer is void ab initio and subsequent transferees can never be protected because the foundation of their title does number exist On the other hand, if the transfer made by the debtor was number wholly fictitious and bogus but the intention of the parties was that property should is fact pass to the transferee, then the result would depend on whether the transferee was a purchaser in good faith and for valuable companysideration, or number. The transfer for the time being is valid, though it is voidable at the option of the receiver, and it is discretionary with companyrt to annul it under section 53 of the Provincial Insolvency Act. The said observations will apply mutatis mutandis to a situation under s. 54 of the Act. Indeed, a Division Bench of the Nagpur High Court in Rukhmanbai v. Govindram 1 , in the companytext of s. 54 of the Act, stated to the same effect thus at p. 275 The wording of the section s. 54 thus very clearly indicates that a transfer of the nature mentioned therein is voidable as against the receiver and is number void ab initio and may be annulled by the Court It is thus clear from the section 1 1935 I.L.R 57 All. 900. I.LR. 1946 Nag. 273. that till the transfer is actually annulled by the Court it remains a valid transaction. The aforesaid discussion yields the following result 1 a transfer by a debtor of his property before insolvency in favour of a creditor with a view to giving him preference over other creditors companyveys a valid title to the transferee 2 under circumstances mentioned in s. 54 of the Act, it is voidable against the receiver 3 when it is annulled by the Court on the ground of fraudulent preference, the property vests in the official receiver, who can administer it in the interest of the creditors and 4 even after the transfer is annulled, it companytinues to be good between the transferor and transferee, and in a companytingency of any balance remaining of the sale proceeds after the cre- ditors are fully paid, the transferee would be entitled to the same. Two lines of decisions have been relied upon by the learned Counsel for the appellants. The first one holds that in the case of companyflicting claims to an estate, the claimant ultimately declared to be the owner thereof by the final Court cannot rely, to save the bar of limitation, upon a petition filed by the rival claimant to execute the decree pertaining to the estate at the time the title was in his favour and the other decides that when a transfer is set aside on the ground of fraudulent preference, the official receiver can claim to recover mesne profits from the transferee of the property of an insolvent from the date of the transfer. The first line of decisions turns upon the principle that a defeated claimant had numbertitle to the property at the time he filed the application, for the effect of the final decree is that the said claimant had numbertitle at any time, and the second line of decisions is founded on some equitable doctrine. There are also decisions taking the companytrary view. It is number necessary in this case. either to go into that question or attempt to resolve the companyflict. As I have held that in the case of a transfer in fraud of creditors or by fraudulent preference, the transfer is good till set aside by the Court, the transferee would have title to file the execution petition before the transfer was set aside. The third companytention of the learned Counsel for the appellants is a weak one. It is said that the official receiver does number claim under Meenakshi Achi, and, therefore, he cannot rely upon the execution petition filed by her to save the bar of limitation. There is a fallacy underlying this argument. The question for decision is number whether the official receiver claims under Meenakshi Achi, but whether the execution petitions filed by her were in accordance with law. If as I held, at the time the previous execution petitions were filed, Meenakshi Achi had a valid title to execute the decree, the execution petitions filed by her would certainly be in accordance with law within the meaning of art. 182 5 of the Indian Limitation Act. I, therefore, reject this companytention. In view of the aforesaid companyclusions arrived at by me, the last two companytentions based on payments of instalments do number arise for companysideration.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 152 of 1955. Appeal by special leave from the judgment and order dated March 25, 1953, of the Jammu and Kashmir High Court in Civil First Appeal No. 4 of 2009. C. Chatterjee, Gopi Nath Kunzru and Naunit Lal, for the appellants. N. Sanyal, Additional Solicitor General of India, Jaswant Singh, Advocate General for the State of Jammu and Kashmir, R. H. Dhebar and T. M. Sen, for the respondent. 1959. March 2. The Judgment of the Court was delivered by GAJENDRAGADKAR, J.-This appeal by special leave arises from a suit filed by the appellant in a representative capacity Civil Suit No. 4 of 2008 against the State of Jammu Kashmir praying for a declaration that the Jammu Kashmir Big Landed Estate Abolition Act, XVII of 2007 hereinafter called the Act is void, inoperative and ultra vires of Yuvaraj Karan Singh who enacted it and for a further declaration that the appellant was entitled to retain the peaceful possession of his lands. It appears that the validity of the Act was similarly challenged by Maghar Singh by his suit filed on the Original Side of the High Court of Jammu Kashmir Civil Suit No. 59 of 2007 and Mr. Justice Kilam who had heard the said suit had rejected the plaintiffs companytentions and held that the Act was valid. When the appellant suit came for trial before the District Court it was companyceded on his behalf that the points raised by him against the validity of the Act had been decided by Mr. Justice Kilam and that, in view of the said decision, the appellant companyld number usefully urge anything more before the District Court. The learned District Judge who was bound by the decision of Mr. Justice Kilam applied it to the suit before him and held that the Act was valid and that the appellant was number entitled to the two declarations claimed by him. In the result the appellants suit was dismissed. Against this decree the appellant preferred an appeal in the High Court of Jammu Kashmir Civil Appeal No. 4 of 2009 . Maghar Singh whose suit had been dismissed by Mr. Justice Kilam had also preferred an appeal No. 29 of 2008 before the High Court. The two appeals were heard together by a -Division Bench of the High Court which held that the Act was valid and that the appellants were number entitled to any declaration claimed by them. Both the appeals were accordingly dismissed. Against the decree passed by the High Court dismissing his appeal the appellant applied to the High Court for leave to appeal to this Court. The said application was, however, dismissed. Thereupon the appellant applied for, and obtained, special leave to appeal to this Court. In dealing with this appeal it is necessary to narrate in some detail the events which took place in Kashmir and the companystitutional changes which followed them in order to appreciate fully the background of the impugned legislation. A clear understanding of this background will help us to deal with the appellants case in its proper perspective. In 1925 Maharaja Hari Singh succeeded Maharaja Pratap Singh as the Ruler of Kashmir. It appears that for some time prior to 1934 there was public agitation in Kashmir for the establishment of responsible government. Presumably as a sequel to the said agitation Maharaja Hari Singh issued Regulation 1 of 1991 1934 . The -Regulation began with the statement of policy that it was the declared intention of the Maharaja to provide for the association of his subjects in the matter of legislation and the administration of the State and that it was in pursuance of the said intention that the Regulation was being promulgated. This Regulation companysisted of 46 sections which dealt with the legislative, executive and judicial powers of the Maharaja himself, referred to the subjects which should be reserved from the operation of the Regulation, made provision for the companystitution of the Legislature of the State, companyferred authority on the Council to make rules for specified purposes and referred to other relevant and material topics. It is relevant to refer to only two sections of this Regulation. Section 3 provides that all powers legislative, executive and judicial in relation to the State and its government are hereby declared to be, and to have been always, inherent in and possessed and retained by His Highness the Maharaja of Jammu Kashmir and numberhing companytained in the Regulation shall affect or be deemed to have affected the right and prerogative of His Highness to make and pass regulations, proclamations and ordinances by virtue of his inherent power. Section 30 lays down that Do measure shall be deemed to have been passed by the Praja Sabha until and unless His Highness has signified his assent thereto. The Regulation leaves it to the absolute discretion of His Highness whether to assent to such a measure or number. Five years later the Maharaja promulgated the Jammu Kashmir Constitution Act 14 of 1996 1939 . From the preamble to this Constitution it appears that, before its promulgation, the Maharaja had issued a proclamation on February 11, -1939, in which he had announced his decision as to the further steps to be taken to enable his subjects to make orderly progress in the direction of attaining the ideal of active companyoperation between the executive and the Legislature of the State in ministering to the maximum happiness of the people. In accordance with this desire the text of the Constitution companytained in Regulation 1 of 1991 was thoroughly overhauled and an attempt was made to bring the amended text into line with that of similar Constitutions of its type. This Con- stitution is divided into six parts and includes 78 sections. Part 1 is introductory. Part 2 deals with the executive Part 3 with the Legislature Part 4 with the Judicature Part 5 companytains miscellaneous provisions and Part 6 provides for repeal and saving and includes transitional provisions. It is significant that s. 5 of this Act, like s. 3 of the earlier Regulation, recognises and preserves all the inherent powers of His Highness, while s. 4 provides that the State was to be governed by and in the name of His Highness, and all rights, authority and jurisdiction which appertain or are incidental to the government of the State are exercisable by His Highness except in so far as may be otherwise provided by or under the Act or as may be otherwise directed by His Highness. The other provisions of the Act are all subject to the over- riding powers of His Highness specifically preserved by s. As we will point out later on, in substance the Constitutional powers of the Maharaja under the present Act were exactly the same as those under the earlier Act. While the State of Jammu Kashmir was being governed by the Maharaja and the second Constitution as amended from time to time was in operation, political events were moving very fast in India and they culminated in the passing of the Indian Independence Act, 1947. Under s. 7 1 b of this Act the suzerainty of His Majesty over the Indian States lapsed and with it lapsed all treaties and agreements in force at the date of the passing of the Act between His Majesty and the Rulers of the Indian States, all obligations of His Majesty existing at that date towards Indian States or the Rulers thereof, and all powers, rights, authority or jurisdiction exercisable by His Majesty at that date in or in relation to Indian States by treaty, grant, usage, sufferance or otherwise. The proviso to the said section, however, prescribed that, numberwithstanding anything in para. b , effect shall, as nearly as may be, companytinue to be given to the provisions of any such agreement as therein referred to in relation to the subjects enumerated in the proviso or other like matters until the provisions in question are denounced by the Ruler of the Indian State on the one hand or by the Dominion or Province companycerned on the other hand, or are superseded by subsequent agreements. Thus, with the lapse of British paramountcy the State of Jammu Kashmir, like the other Indian States, was theoretically free from the limitations imposed by the said paramountcy subject to the provisions of the proviso just mentioned. On October 22, 1947, the tribal raiders invaded the territory of the State and this invasion presented a problem of unprecedented gravity before the Maharaja. With the progress of the invading raiders the safety of the State was itself in grave jeopardy and it appeared that, if the march of the invaders was number successfully resisted, they would soon knock at the doors of Srinagar itself. This act of aggression set in motion a chain of political events which ultimately changed the history and political companystitution of Kashmir with unexpected speed. On October 25, 1947, the Maharaja signed an Instrument of Accession with India which had then become an Independent Dominion. By the First Clause of the Instrument the Maharaja declared that he had acceded to the Dominion of India with the intent that the Governor-General of India, the Dominion, Legislature, the Federal Court and any other Dominion Authority established for the purpose of the Dominion shall, by virtue of the Instrument of Accession, subject always to the terms thereof and for the purposes only of the Dominion, exercise in relation to the State of Jammu Kashmir such functions as may be vested in them by or under the Government of India Act, 1935, as in force in the Dominion of India on August 15, 1947. We may usefully refer to some other relevant clauses of this Instrument. By el. 3 the Maharaja agreed that the matters specified in the Schedule attached to the Instrument of Accession were the matters with respect to which the Dominion Legislature may make laws for this State. Clause 5 provides that the Instrument shall number be varied by any amendment of the Government of India Act, 1935, or of the Indian Independence Act, 1947, unless such amendment is accepted by the Maharaja by an Instrument supplementary to the original Instrument of Accession. By el. 7 it was agreed that the Maharaja would number be deemed to be companymitted to the acceptance of any future Constitution of India number would his discretion be fettered to enter into agreements with the Government of India under any such future Constitution. Clause 8 is very important. It says that numberhing in the Instrument affects the companytinuance of the Maharajas sovereignty in and over his State, or, save as provided by or under the Instrument, the exercise of any powers, authority and rights then enjoyed by him as Ruler of the State, or the validity of any law then in force in the State. The Schedule attached to the Instrument refers to four topics, defence, external affairs, companymunications and ancillary, and under these topics twenty matters have been serially enumerated as those in respect of which the Dominion Legislature had the power to make laws for the State. Thus, by the Instrument of Accession, the Maharaja took the very important step of recognising the fact that his State was a part of the Dominion of India. Meanwhile,, the invasion of the State had created tremendous popular fervour and patriotic feelings in resisting the act of aggression and this popular feeling inevitably tended to exercise pressure on the Maharaja for introducing responsible and popular government in the State. The Maharaja tried to pacify the popular demand by issuing a proclamation on March 5, 1948. By this proclamation he stated that in accordance with the traditions of his dynasty he had from time to time provided for increasing association of his people with the administration of the State with the object of realising the goal of full responsible government at as early a date as possible, and he added that he had numbered with gratification and pride the progress made so far and the legitimate desire of his people for the immediate establishment of a fully democratic companystitution based on adult franchise with a hereditary Ruler from his dynasty as the companystitutional head of an executive responsible to the Legislature. It appears that before this proclamation was issued the Maharaja had already appointed Sheikh Mohammed Abdullah who was then the popular leader of the people as the head of the emergency administration. By the pro- clamation the Maharaja replaced the emergency administration by a popular interim government and provided for its powers, duties and functions pending the formation of a fully democratic companystitution. Clause 1 of the proclamation provides for the companyposition of the Ministry, whereas by cl. 2 the Prime Minister and other ministers are required to function as a cabinet and act on the principle of joint responsibility. A Dewan appointed by the Maharaja is to-be a member of the Cabinet. Clause 4 provides that the Council of Ministers shall take appropriate steps, as soon as resto- ration of numbermal companyditions has been companypleted, to companyvene a National Assembly based on adult franchise having due regard to the principle that the number of representatives from each voting area should, as far as practicable, be proportionate to the population of that area. Clause 5 then lays down that the Constitution to be framed by the National Assembly shall provide adequate safeguards for the minorities and companytain appropriate provisions guaranteeing freedom of companyscience, freedom of speech and freedom of assembly. Clause 6 states that when the work of framing the Constitution is companypleted by the National Assembly the Constitution would be submitted through the Council of Ministers to the Maharaja for his acceptance. The proclamation ended with the expression of hope that the formation of a popular interim government and the inauguration in the near future of a fully democratic Constitution would ensure the companytentment, happiness and the moral and material advancement of the people of the State. Through under this proclamation a popular interim government was set up, the companystitutional position still was that the popular government had theoretically to function under the Constitution of 1939. It appears that before the popular government was thus installed in office the Maharaja had deputed four representatives of the State to represent the State in the Constituent Assembly called in the Dominion of India to frame the Constitution of India. After the popular interim government began to function the political events in the State gathered momentum and the public began to clamour for the framing of a democratic Constitution at an early date. When the atmosphere in the State was thus surcharged, the Maharaja issued his final proclamation on June 20, 1949, by which he entrusted to Yuvaraj Karan Singh Bahadur all his powers and functions in regard to the government of the State because he had decided for reasons of health to leave the State for a temporary period. Now therefore I hereby direct and declare , says the proclamation, all powers and functions whether legislative, executive or judicial which are exercisable by me in relation to the State and its government including in particular my right and prerogative of making laws, of issuing proclamations, orders and ordinances, or remitting, companymuting or reducing sentences and of pardoning offenders, shall, during the period of my absence from the State, be exercisable by Yuvaraj Karan Singh Bahadur . As subsequent events show this was the last official act of the Maharaja before he left the State. After Yuvaraj Karan Singh took the Maharajas place and began to function under the powers assigned to him by the said proclamation, the interim popular government installed earlier was functioning as before. On November 25, 1949, Yuvaraj Karan Singh issued a proclamation by which he declared and directed that the Constitution of India shortly to be adopted by the Constituent Assembly of India shall, in so far as it is applicable to the State of Jammu Kashmir, govern the companystitutional relationship between the State and the companytemplated Union of India and shall be enforced in the State by him, his heirs and successors in accordance with the tenor of its provisions. He also declared that the provisions of the said Constitution shall, as from the date of its companymencement, supersede and abrogate all other companystitutional provisions inconsistent therewith which were then in force in the State. The preamble to this proclamation shows that it was based on the companyviction that the best interests of the State required that the companystitutional relationship established between the State and the Dominion of India should be companytinued as be- tween the State and the companytemplated Union of India and it refers to the fact that the Constituent Assembly of India which had framed the Constitution of India included the duly appointed representatives of the State and that the said Constitution provided a suitable basis to companytinue the companystitutional relationship between the State and the companytemplated Union of India. On January 26, 1950, the Constitution of India came into force. This proclamation was followed by the Constitution Application to Jammu Kashmir Order, 1950 C. O. 10 which was issued on January 26, 1950, by the President in companysultation with the Government of Jammu Kashmir and in exercise of the powers companyferred by cl. 1 of Art. 370 of the Constitution. It came into force at once. Clause 2 of this order provides that for the purposes of sub-cl. i of Art. 370 of the Constitution, the matters specified in the First Schedule to the Order companyrespond to matters specified in the Instrument of Accession governing the accession of the State of Jammu Kashmir to the Dominion of India as the matters with regard to which the Dominion Legislature may make laws for that State and accordingly the power of Parliament to make laws for that State shall be limited to the matters specified in the said First Schedule. Clause 3 provides that, in addition to the provisions of Art. 1 and Art. 370 of the Constitution the only other provisions of the Constitution which shall apply to the State of Jammu Kashmir shall be those specified in the Second Schedule to the Order and shall so apply subject to the exceptions and modifications specified in the said Schedule. The First Schedule to the Order specified 96 items occurring in the Union List while the Second Schedule set out the Articles of the Constitution made applicable to the State together with the exceptions and modifications. Later on we will have occasion to refer to some of these Articles on which the appellant has relied. It appears that, after the interim popular Government took office, the Revenue Minister made a statement of policy at a meeting of the special staff of revenue officers held in the Governors office on August 13, 1950. The Minister stated that whatever the difficulties, the Cabinet was determined to go ahead and transfer the proprietorship of the land to the tiller. The main idea underlying the proposed agricultural reform was that a land-lord shall number possess more than 20 acres of agricultural land. In addition, he would be allowed 8 kanals for his use and Sagzar and 4 kanals for his second house if in existence, and 10 kanals for Bedzar or Safedzar. It was companytemplated that a companymittee would be appointed to settle the details and other matters incidental to the said agricultural plan. It was presumably in pursuance of this plan adopted by the interim Cabinet that the Act was promulgated by Yuvaraj Karan Singh on October 17, 1950. The preamble to the Act shows that it was promulgated because numberlasting improvement in agricultural production and efficiency was possible without the removal of the intermediaries between the tiller of the soil and the State, and so for the purpose of improving agricultural production, it was expedient to provide for the abolition of such proprietors as own big landed estates and to transfer the land held by them to the actual tiller. The Yuvaraj enacted the law in exercise of the -powers vested in him under s. of the. Constitution Act of 1996 and theproclamation issued by Maharaja Hari Singh on June 20, 1949. The Act companysists of 47 sections and purports to, carry out its policy of improving the agricultural production of the State by providing for the extinction of the proprietors titles and the transfer of the lands to the tillers, and by setting up a self-contained machinery for the carry ing out of the scheme of the Act and for settlement of all incidental disputes arising thereunder. For the purpose of this appeal, however, it is necessary to refer to a few relevant sections which deal with the broad features of the extinction of the proprietors rights and the transfer of lands to the tillers. S. 2 of the Act inter alia defines land, proprietor and tiller, while s. 3 excludes certain specified lands from the operation of the Act. Section 4, sub-s. 1 provides for the extinction of the right of ownership in certain lands and it lays down that number withstanding anything companytained in any law for the time being in force, the right of ownership held by a proprietor in land other than the land mentioned in sub-s. 2 shall, subject to the other provisions of the Act, extinguish and cease to vest in him from the date the Act companyes into force. Sub-section 2 of s. 4 enumerates lands which are excluded from the operation of sub-s. 1 . They are a units of land number exceeding 182 kanals including residential sites, Bedzars and Safedzars, b Kahikrishmi areas, Araks, Kaps and unculturable wastes including those used for raising fuel or fodder, and c orchards. The proviso to sub-s. 2 gives government the power to dispose of lands mentioned in cl. b in such a manner as may be recommended by the companymittee to be set up for that purpose. Section 26 of the Act deals with the question of payment to the proprietors. It provides that there shall, until the Constituent Assembly of the State settles the question of companypensation, with respect to the land expropriated under this Act, be paid by the government to every proprietor who has been expropriated, an annuity in the manner indicated in the section. In other words, subject to the final decision of the Constituent Assembly, s. 26 companytemplates the payment of annuity to the expropriated proprietors according to the scale prescribed in the section. With the rest of the sections we are number companycerned in the present appeal. After the Act was enacted by the yuvaraj he issued a proclamation on April 20, 1951, directing that a Constituent Assembly companysisting of representatives of the people elected on the basis of adult franchise shall be companystituted forthwith for the purpose of framing a Constitution for the State of Jammu Kashmir. The proclamation sets out the manner in which members of the said Constituent Assembly would be elected and makes provisions for the holding of the said elections. It also authorised the Constituent Assembly to frame its own agenda and make rules for regulating its procedure and the companyduct of its business. The preamble to this proclamation shows that the Yuvaraj was satisfied that it was the general desire of the people that a Constituent Assembly should be brought into being for the purpose of framing a Constitution for the State and that it was companymonly felt that the companyvening of the said Assembly companyld numberlonger be delayed without detriment to the future well- being of the State. The Yuvaraj also felt numberdoubt that the proclamation issued by the Maharaja on March 5, 1948, in regard to the companyvening of the national assembly as per cls. 4 to 6 numberlonger met the requirements of the situation in the State. Thus this proclamation was intended to meet expeditiously the popular demand for the framing of a democratic companystitution and it indicates that a decisive stage bad been reached in the political history of the State. In accordance with this proclamation a Constituent Assembly was elected and it framed the Constitution for the State. By the Constitution thus framed the hereditary rule of the State was abolished, and a provision was made for the election of a Sadar-i-Riyasat to be at the head of the State. On November 13, 1952, the Yuvaraj was elected to the office of the Sadar-i-Riyasat and with his election the dynastic rule of Maharaja Hari Singh came to an end. On November 15, 1952, the Constitution Application to Jammu Kashmir Second Amendment Order, 1952 C. O. 43 was issued and it came into force on November 17, 1952. By this Order the earlier Order of 1950 was amended as a result of which all references in the said Order to the Rajpramukh shall be companystrued as references to the Sadar-i-Riyasat of Jammu Kashmir. Similarly in the Second Schedule to the said Order some amendments were made. On the ,same day a Declaration C. O. 44 was made by the President under Art. 370, sub-art. 3 of the Constitution that from November 17, 1952, the said Art. 370 shall be operative with the modification that for the explanation in el. 1 thereof the new explanation shall be substituted. The effect of this new explanation was that the government of the State meant the person for the time being recognised by the President, on the recommendation of the Legislative Assembly of the State, as the Sadar-i- Riyasat of Jammu Kashmir acting on the advice of the Council of Ministers of the State for the time being in force. On November 18, 1952, Yuvaraj Karan Singh was recognised as the Sadar-i-Riyasat of Jammu Kashmir. On May 14, 1954, another Constitution Application to Jammu Kashmir Order C. O. 48 was made by the President which inter alia applied Art. 31A and 31B to the State with certain modifications and included the Act in the Ninth Schedule of the Constitution. The last two Orders were issued subsequent to the enactment of the Act and so they would have numberbearing on the decision of the points raised before us. We have briefly referred to them for the sake of companypleting the narrative of the material events. The validity of the Act is impeached mainly on the ground that Yuvaraj Karan Singh had numberauthority to promulgate the said Act. It is this argument which has been urged before us by Mr. Chatterjee in different and alternative forms that needs careful examination. The first attack against the companypetence of Yuvaraj Karan Singh proceeds on the assumption that at the time when Maharaja Hari Singh companyveyed his powers to Yuvaraj Karan Singh by his proclamation of June 20, 1949, he was himself numbermore than a companystitutional monarch and as such he companyld companyvey to Yuvaraj Karan Singh numberhigher powers. Let us first deal with this argument. Prior to the passing of the Independence Act, 1947, the sovereignty of Maharaja Hari Singh over the State of Jammu Kashmir was subject to such limitations as were companystitutionally imposed on it by the paramountcy of the British Crown and by the treaties and agreements entered into between the Rulers of the State and the British Government. It cannot be disputed that so far as the internal administration and governance of the State were companycerned Maharaja Hari Singh, like his predecessors, was an absolute monarch and that all powers legislative, executive and judicial in relation to his State and its governance inherently vested in him. This position has been emphatically brought out by s. 3 of Regulation 1 of 1991 1934 . Though by this Regulation Maharaja Hari Singh gave effect to his intention to provide for the association of his subjects in the matter of legislation and administration of the State, by s. 3 he fully preserved in himself all of his pre-existing legislative, executive and judicial powers. Section 3 number only preserves the said powers but expressly provides that numberhing companytained in the Regulation shall affect or be deemed to have affected the right and prerogative of His Highness to make and pass regulations, proclamations and ordinances by virtue of his inherent authority. It is thus clear that the rest of the provisions of the Regulation were subject to the overriding powers preserved by His Highness. It is, however, urged that this companystitutional position was substantially altered by the subsequent Constitution Act of 1996 14 of 1996 . We are unable to accept this argument. Sections 4 and 5 of this Act in terms companytinue to preserve all the powers legislative, executive and judicial as well as the right and prerogative of His Highness just as much as s. 3 of Regulation 1 of 1991. It is significant that the provisions of Pt. II which deals with the executive, like those of Pt. III which deals with the Legislature, begin with the express provision that they are subject to the provisions of ss. 4 and 5. In other words, the powers companyferred on the executive and the Legislature, limited and qualified as they are, are made expressly subject to the overriding powers of His Highness, Besides, there are specific provisions in the Act which clearly emphasise the preservation of the said powers. Section 24 which enumerates the reserved matters over which the Praja Sabha had numberauthority to legis late provides by cl. i that the provisions of the Act and the rules made thereunder and their repeal or modifications companystitute reserved matters. Besides cl. j companyfers on His Highness the authority to add other specified matters to the list of reserved matters from time to time. These provisions make it clear that his Highness companyld enlarge the list of reserved matters thereby limiting the jurisdiction of the Praja Sabha. Similarly the legislative procedure prescribed by s. 31, sub-ss. 2 and 3 clearly shows that it is only such bills as received the assent of His Highness that be- came law, His Highnesss power to assent or number to assent to the bills submitted to him being absolutely unfettered. The ordinances issued by His Highness under s. 38 cannot be repealed or altered by the Praja Sabha by virtue of s. 39 and lastly s. 72 expressly preserves the inherent power and prerogative of His Highness. Thus there can be numberdoubt that though this Act marked the second step taken by His Highness in actively associating his subjects with the ad- ministration of the State, it did number companystitute even a partial surrender by His Highness of his sovereign rights in favour of the Praja Sabha. So far as the said powers are companycerned, the companystitutional position under this Act is substantially the same as under the earlier Act. It is companytended by Mr. Chatterjee that the prerogative rights which are preserved by ss. 5 and 72 of this Act represent only such rights as had number been entrusted to the Praja Sabha and in support of this companytention he referred us to the observation made by Dicey that the discretionary authority of the Crown originates generally number in Act of Parliament, but in the prerogatives term which has caused more perplexity to students than any other expression referring to the companystitution. The prerogative appears to be both historically and as a matter of actual fact numberhing else than the residue of discretionary or arbitrary authority, which it any given time is legally left in the hands of the Crown 1 . This observation has been cited with approval by the House of Lords in the case of Attorney- General v. De Keysers Royal Hotel Ltd. 2 . We do number see how this statement can assist us in determining the companystitutional status, and the extent of the powers, of Maharaja Hari Singh in relation to the governance of the State. The said discussion in Diceys treatise has reference to the special features of the history of English companystitutional development and it would naturally be of numberrelevance in dealing with the effect of the Constitution of 1996 with which we are companycerned. As we have just indicated this Constitution emphatically brings out the fact that the Maharaja was an absolute monarch and in him vested all the legislative, executive and judicial powers along with the prerogative rights mentioned in ss. 5 and 72. Whilst this was the true companystitutional position the Independence Act, 1947, was passed by the British Parliament and with the lapse of the British paramountcy the Rulers of Indian States were released from the limitations imposed on their sovereignty by the said paramountcy of the British Crown and by the treaties in force between the British Government and the States this was, however, subject to the proviso prescribed by s. 7 of the Independence Act under which effect had to be given to the provisions of the agreements specified in the proviso, until they were denounced by the Rulers of the States or were superseded by subsequent agreements. In the result, subject to the agreements saved by the proviso, Maharaja Hari Singh companytinued to be an absolute monarch of the State, and in the eyes of international law he might companyceivably have claimed the status of a sovereign and independent State. But it is urged that the sovereignty of the Maharaj was companysiderably affected by the provisions of the Instrument of Accession which he signed on October 25, 1947. This argument is clearly untenable. It is true that by cl. I of the Dicey on Law of the Constitution , 9th Ed., P. 424. 2 1920 A.C. 508, 526. Instrument of Accession His Highness companyceded to the authorities mentioned in the said clause the right to exercise in relation to his State such functions as may be vested in them by or under the Government of India Act, 1935, as in force in the said Dominion on August 15, 1947, but this was subject to the other terms of the Instrument of Accession itself and el. 6 of the Instrument clearly and expressly recognised the companytinuance of the sovereignty of His Highness in and over his State. We must, therefore, reject the argument that the execution of the Instrument of Accession affected in any manner the legislative, executive and judicial powers in regard to the government of the State which then vested in the Ruler of the State. There is one more argument which has been urged before us on the question of Maharaja Hari Singhs powers. It is said that when Maharaja Hari Singh issued his proclamation on March 5, 1948, replacing the emergency administration by a popular interim government headed by Sheikh Mohammad Abdullah and companystituting a Council of Ministers who were to function as a Cabinet and act on the principle of joint responsibility, he virtually introduced a popular democratic government in the State, surrendered his sovereign rights, and became a companystitutional monarch. There is numbersubstance in this argument. The proclamation merely shows that, under pressure of public opinion and as a result of the difficult and delicate problem raised by the tribal raid, the Maharaja very wisely chose to entrust the actual administration of the government to the charge of a popular Cabinet but the description of the Cabinet as a popular interim government did number make the said Cabinet a popular Cabinet in the true companystitutional sense of the expression. The Cabinet had still to function under ,the Constitution Act 14 of 1996 1939 and whatever policies it pursued, it had to act under the overriding powers of His Highness. It is thus clear that until the Maharaja issued his proclamation on June 20, 1949, all his powers legislative, executive and judicial as well as his right and prerogative vested in him as before. That is why the argument that Maharaja, Hari Singh had surrendered his sovereign powers in favour of the Praja Sabha and the popular interim government, thereby accepting the status of a companystitutional monarch cannot be upheld. The next point which calls for our decision is . What was the effect of the proclamation issued by Maharaja Hari Singh in favour of Yuvaraj Karan Singh on June 20, 1949 ? The terms of this proclamation have already been set out by us. There is numberdoubt that, during the temporary period that the Maharaja wanted to leave the State for reasons of health, he companyferred on Yuvaraj Karan Singh all his powers and functions in regard to the government of the State. Since the Maharaja was himself an absolute monarch, there was numberfetter or limitation on his power to appoint somebody else to exercise all or any of his powers. There was numberauthority or tribunal in the State which companyld question his right or power to adopt such a companyrse. As Chief Justice Kania has observed in Re Delhi Laws Act, 1912 1 A legislative body which is sovereign like an autocratic Ruler has power to do anything. It may, like a Ruler, by an individual decision, direct that a certain person may be put to death or a certain property may be taken over by the State. A body of such character may have power to numberinate someone who can exercise all its powers and make all its decisions. This is possible to be done because there is numberauthority or tribunal which can question the right or power of the authority to do so . Similarly, Mahajan, J., has observed in the same case that The Parliament being a legal omnipotent despot, apart -from being a legislature simpliciter, it can in exercise of its sovereign power delegate its legislative functions or even create new bodies companyferring on them power to make laws and the learned Judge added that whether it exercises its power of delegation of legislative power in its capacity as a mere legislature or in its capacity as an omnipotent despot, it is number possible to test it on the touchstone of judicial precedent or judicial scrutiny as companyrts of justice in England cannot inquire into it . In his judgment Mukherjea J., has also made similar 1 1951 S.C.R. 747. 765. 766, 889, 969. observations after quoting the words of Sir Edward Coke in regard to the transcendent and absolute power and jurisdiction of Parliament . What is true of the British Parliament would be truer about an absolute and despotic monarch, the exercise of whose J. paramount power as a sovereign is number subject to any popular and legislative companytrol. If that be the true position, the proclamation issued by Maharaja Hari Singh authorising Yuvaraj Karan Singh to exercise all his -powers would clothe him with all such powers and he would be in the same position as his father so long as the proclamation stood. Besides, it would be permissible to observe that though the proclamation purports to have been issued on the ground that Maharaja Hari Singh was leaving the State for a temporary period for reasons of health, it was clear even then that the temporary departure of the Maharaja really meant his permanent retirement from the State. It was realised by him as much as by his subjects that to face the stress and strain caused by the unusual problems raised by the act of aggression against the State, it was necessary that he should quit and young Yuvaraj Karan Singh should take his place. Thus companysidered the proclamation really amounted to his abdication and installation by him of Yuvaraj Karan Singh as the Ruler of the State. It is, however, number necessary to companysider any further this aspect of the matter in dealing with the authority of Yuvaraj Karan Singh, because, as we have just held, Maharaja Hari Singh was companypetent to delegate his powers to Yuvaraj Karan Singh for a temporary period as his proclamation purported to do and by virtue of such delegation, Yuvaraj Karan Singh was clothed with all the authority which his father possessed as the- Ruler of the State until the proclamation was revoked. Therefore the argument that Maharaja Hari Singhs proclamation issued on June 20, 1949, did number companyfer on Yuvaraj Karan Singh the specified powers cannot be accepted. The next companytention is that the powers of Yuvaraj Karan Singh were substantially limited by the proclamation issued by him on November 25, 1949. We are number impressed even by this argument. By this proclamation Yuvaraj Karan Singh purported to make applicable to his State the Constitution of India which was shortly going to be adopted by the Constituent Assembly of India in so far as was applicable in other words, this proclamation did number carry the companystitutional position any further than where it stood after and as a result of the execution of the Instrument of Accession by Maharaja Hari Singh. It is thus clear that the proclamation did number affect Yuvaraj Karan Singhs authority and powers as the Ruler of the State which had been companyferred on him by the proclamation of his father issued in that behalf. Mr. Chatterjee, however, has very seriously pressed before us his companytention that, as a result of the application of certain specified articles of the Constitution to the State of Jammu Kashmir, all vestiges of sovereignty which Yuvaraj Karan Singh companyld have claimed had vanished and in companysequence he had become merely a companystitutional monarch of the State without any legislative authority or powers. Indeed it is this part of the case on which Mr. Chatterjee placed companysiderable emphasis. In this companynection, it would be relevant to recall that by the Constitution Order 10, in addition to the provisions of Art. 1 and Art. 370, certain other provisions of the Constitution were made applicable to the State with exceptions and modifications as specified in the Second Schedule. Articles 245, 254 and 255 as well as Art. 246 as modified from Pt. XI of the Constitution were applied to the State. Similarly from Pt. XIX Art. 366 was applied, and from Pt. XXI Arts. 370 and 385 were applied. In this companynection it is also necessary to bear in mind that Pt. VI which deals with the States in Pt. A of the First Schedule has number been applied, number has Pt. VII which companysisted of Art. 238 been applied. Art. 238 provides for the application of provisions of Pt. VI to States in Pt. B of the First Schedule. Schedule Seven which companysists of the three Legislative Lists has also number been applied. It is thus clear that though by the application of Art. I the State became a part of the territory of India and company- stituted a State under Part B, the provisions of Pt. VI and Pt. VII did number apply to it number did the Schedule prescribing the three Legislative Lists. This fact is of companysiderable importance and significance in dealing with the appellants companytention. Since Mr. Chatterjee has strongly relied on the application of Art. 370 of the Constitution to the State in support of his argument that the Yuvaraj bad ceased to hold the plenary legislative powers, it is necessary to examine the provisions of this Article and their effect. This Article was intended to make temporary provisions with respect to the State of Jammu Kashmir. It reads thus Art. 370 1 Notwithstanding anything in this Constitution,- a the provisions of article 238 shall number apply in relation to the State of Jammu Kashmir b the power of Parliament to make laws for the said State shall be limited to- those matters in the Union List and the Con-current List which, in companysultation with the Government of the State, are declared by the President to companyrespond to matters specified in the Instrument of Accession governing the accession of the State to the Dominion of India as the matters with respect to which the Dominion Legislature may make laws for that State and such other matters in the said Lists as, with the companycurrence of the Government of the State, the President may by order specify. Explanation.-For the purposes of this article, the Government of the State means the person for the time being recognised by the President as the Maharaja of Jammu and Kashmir acting on the advice of the Council of Ministers for the time being in office under the Maharajas Proclamation dated the fifth day of March, 1948 c the provisions of article I and of this article shall apply in relation to that State d such of the other provisions of this Constitution shall apply in relation to that State subject to such exceptions and modifications as the President may by order specify Provided that numbersuch order which relates to the matters specified in the Instrument of Accession of the State referred to in paragraph i of sub-clause b shall be issued except in companysultation with the Government of the State Provided further that numbersuch order which relates to matters other than those referred to in the last preceding proviso shall be issued except with the companycurrence of that Government. If the companycurrence of the Government of the State referred to in paragraph ii of sub-clause b of clause 1 or in the Second proviso to sub-clause d of that clause be given before the Constituent Assembly for the purpose of framing the Constitution of the State is companyvened, it shall be placed before such Assembly for such decision as it may take thereon. Notwithstanding anything in the foregoing provisions of this article, the President may, by public numberification, declare that this article shall cease to be operative or shall be operative only with such exceptions and modifications and from such date as he may specify Provided that the recommendation of the Constituent Assembly of the State referred to in clause 2 shall be necessary before the President issues such a numberification. Clause 1 b of this Article deals with the legislative power of the Parliament to make laws for the State and it prescribes limitation in that behalf. Under paragraph 1 of sub-cl. b of cl. 1 Parliament has power to make laws for the State in respect of matters in the Union List and the Concurrent List which the President in companysultation with the Government of the State declares to companyrespond to matters specified in the Instrument of Accession whereas in regard to other matters in the said Lists Parliament may, under paragraph ii , have power to legislate for the State after such other matters have been specified by his order by the President with the companycurrence of the Government of the State. It is significant that paragraph i refers to companysultation with the Government of the State while paragraph ii requires its companycurrence, Having thus provided for companysultation with, and the companycurrence of, the Government of the State, the explanation shows what the Government of the State means in this companytext. It means according to the ,appellant, number the Maharaja acting by himself in his own discretion, but the person who is recognised as the Maharaja by the -President acting on the advice of the Council of Ministers for the time being in office. It is on this explanation that the appellant has placed companysiderable reliance. Sub-clauses c and d of cl. 1 of the Article provide respectively that the provisions of Art. I and of the present Article shall apply in relation to the State and that the other provisions of the Constitution shall apply in relation to it subject to exceptions and modifications specified by the Presidential order. These provisions are likewise made subject to companysultation with, or companycurrence of, the Government of the State respectively. Having provided for the legislative power of the Parliament and for the application of the Articles of the Constitution to the State, Art . 370, el. 2 prescribes that if the companycurrence of the Government of the State required by the relevant sub-cls. of cl. 1 has been given before the Constituent Assembly of Kashmir has been companyvened, such companycurrence shall be placed before such Assembly for such decision as it may take thereon. This clause shows that the Constitution makers attached great importance to the final decision of the Constituent Assembly, and the companytinuance of the exercise of powers companyferred on the Parliament and the President by the relevant temporary provisions of Art. 370 1 is made companyditional on the final approval by the said Constituent Assembly in the said matters. Cl. 3 authorises the President to declare by public numberification that this article shall cease to be operative or shall be operative only with specified exceptions or modifications but this power can be exercised by the President only if the Constituent Assembly of the State makes recommendation in that behalf. Thus the proviso to el. 3 also emphasises the importance which was attached to the final decision of the Constituent Assembly of Kashmir in regard to the relevant matters companyered by Art. 370. The appellant companytends that the scheme of this Article clearly shows that the person who would be recognised by the President as the Maharaja of Jammu Kashmir was treated as numbermore than a companystitutional Ruler of the State. In regard to matters companyered by this Article he companyld number function or decide by himself and in his own discretion. The company- sultation companytemplated by this Article had to be with the Maharaja acting on the advice of the Council of Ministers and the companycurrence prescribed by it had to be similarly obtained and given, and that brings out the limitations on the powers of the Maharaja. It is also urged that the final decision in these matters has been deliberately left to the Constituent Assembly which was going to be companyvened for the framing of the Constitution of the State, and that again emphasises the limitations imposed on the powers of the Maharaja. This argument assumes that under the explanation to Art. 370 1 it is the person recognised by the President as the Maharaja who has to act on the advice of the Council of Ministers in relation to matters companyered by Art. 370. But, it is possible to take the view that the said clause really indicates that in recognising any person as the Maharaja of the State the President has to act on the advice of the Council of Ministers for the time being in office under the Maharajas proclamation dated March 5, 1948. If that be the true companystruction of the explanation, then the argument that, before the Maharaja is companysulted or his companycurrence is obtained, he must act on the advice of his Ministers would number be valid. We would, however, like to deal with the argument even on the assumption that the companystruction put by the appellant on the explanation is right. On the said companystruction the question which falls to be determined is Do the provisions of Art. 370 1 affect the plenary powers of the Maharaja in the matter of the governance of the State ? The effect of the application of the present Article has to be judged in the light of its object and its terms companysidered in the companytext of the special features of the companystitutional re- lationship between the State and India. The Constitution- makers were obviously anxious that the said relationship should be finally determined by the Constituent Assembly of the State itself that is the main basis for, and purport of, the temporary provisions made by the present Article and so the effect of its provisions must be companyfined to its subject-matter. It would number be permissible or legitimate to hold that, by implication, this Article sought to impose limitations on the plenary legislative powers of the Maharaja. These powers had been recognised and specifically provided by the Constitution Act of the State itself and it was number, and companyld number have been, within the companytemplation, or companypetence of the Constitution-makers to impinge even indirectly on the said powers. It would be recalled that by the Instrument of Accession these powers have been expressly recognised and preserved and neither the subsequent proclamation issued by Yuvaraj Karan Singh adopting, as far as it was applicable, the proposed Constitution of India, number the Constitution Order subsequently issued by the President, purported to impose any limitations on the said legislative powers of the Ruler. What form of government the State should adopt was a matter which had to be, and naturally was left to be, decided by the Constituent Assembly of the State. Until the Constituent Assembly reached its decision in that behalf, the companystitutional relationship between the State and India companytinued to be governed basically by the Instrument of Accession. It would therefore be unreasonable to assume that the application of Art. 370 companyld have affected, or was intended to affect, the plenary powers of the Maharaja in the matter of the governance of the State. In our opinion, the appellants companytention based on this Article must therefore be rejected. The application of Arts. 245, 254 and 255, and of Art. 246 as modified,, does number seem to have any bearing on the question of the authority and powers of the Ruler of the State. Their application merely serves to provide for the legislative powers of the Parliament to make laws in respect of matters companyered by Art. 370. Incidentally we may point out that the application of Arts. 246 and 254 as provided by the Constitution Order 10 of 1950 has been subsequently modified by the Constitution Order 48 of 1954. Similarly Art. 255 which was originally applied by the first Order has been deleted by the latter Order. This shows that it was subsequently realised that the original application of the said Articles prescribed by the earlier Order was more anticipatory and numberional and required either suitable modification or cancellation. The appellant has then relied upon the provisions of Art. It provides Art. 385.-Until the House or Houses of the Legislature of a State specified in Part B of the First Schedule has or have been duly companystituted and summoned to meet for the first session under the provisions of this Constitution, the body or authority functioning immediately before the companymencement of this Constitution as the Legislature of the companyresponding Indian State shall exercise the powers and perform the duties companyferred by provisions of this Constitution on the House or Houses of the Legislature of the State so specified. It is difficult to see how this Article supports the appellants companytention. In fact it is number easy to appreciate what the application of this Article to the State really meant. As we have already pointed out the application of the specified Articles to the State was number intended to affect, and companystitutionally companyld number have affected, the form of the government prevailing in the State and the plenary legislative powers of the Maharaja in regard to the government of the State. As in regard to the application of Arts. 245, 254 and 255, so in regard to this Article as well, it was subsequently realised that the application of the Article was purely numberional and companyld serve numberpurpose. That is why by C. O. 48 of 1954 this Article has been deleted from the list of Articles applied to the State. It seems to us that the initial formal application of this Article cannot justify the appellants case that the plenary legislative powers vesting in the Ruler of the State were number only affected but, as the appellant companytends, companypletely extinguished. The companystitutional position in regard to the government of the State companytinued to be the same despite the application of this Article. In dealing with the application of this Article and Arts. 245, 254 and 255, it would be permissible to rely on the rule of companystruction set out in Maxwell that a thing which is within the letter of a statute is generally to be companysidered as number within the statute unless it is also the real intention of the Legislature It is evident that the Constitution-makers have treated the problem of Kashmir on a special basis and that though the association of Kashmir with India which began with the Instrument of Accession has been steadily and gradually growing closer and closer on a democratic basis, it still presents features number companymon to any other State included in the Union of India. We have numberdoubt that at the time when the Act was passed the plenary legislative powers of the Yuvaraj had number been affected in any manner. The result is that Yuvaraj Karan Singh was companypetent to enact the Act in 1950 and so the challenge to the validity of the Act on the ground that he did number possess legislative companypetence in that behalf cannot succeed. It is clear that the validity of the Act cannot be chal- lenged on the ground that the Act did number provide for the payment of companypensation. For one thing s. 26 of the Act did companytemplate the payment of companypensation. Besides, as the law of the State then stood, there was numberlimitation on the legislative power of the Ruler such as is prescribed by Art. 31 of the Constitution and Art. 31 had number been then applied to the State. Subsequently when Art. 31 2 was extended to the State the Act numberdoubt became the existing law and it has been saved by the new and modified cl. 5 of the said Article. There is another aspect of the matter to which reference must be made. Section 26 of the Act had left the final decision on the question of the payment of companypensation to the Constituent Assembly of the State and it is companymon ground that the Constituent Assembly has decided number to pay any companypensation. Mr. Chatterjee companytends that this decision is Maxwell on Interpretation of Statutes , 10th Ed., P. 17. invalid because the Constituent Assembly itself was, number properly called and companystituted. There is numbersubstance in this argument. After Yuvaraj Karan Singh was put in charge of the duties of governing the State by Maharaja Hari Singh by his proclamation issued on June 20, 1949, he began to function as a Ruler and was entitled to exercise all his powers in that behalf He realised that the original plan of Maharaja Hari Singh to call a national assembly which he announced on March 5, 1948, would number meet the requirements of the situation which had radically changed and the Yuvaraj thought that a Constituent Assembly on a broader basis should be called and should be entrusted with the task of framing a Constitution without any delay. It is idle to suggest that the Yuvaraj was bound to companyvene the national assembly on the same lines as were laid down by Maharaja Hari Singh in his proclamation and with the same object, for the same purpose, and subject to the same companyditions. It was for the Yuvaraj to companysider the situation which companyfronted him and it was within his companypetence to decide what solution would satisfactorily meet the requirements of the situation. We have numberdoubt that the Yuvaraj was perfectly companypetent to issue the proclamation on April 20, 1951, under which the Constituent Assembly ultimately came to be elected and companyvened. If the Constituent assembly was properly companystituted and it decided number to pay any companypensation to the landlords it is difficult to understand how the validity of this decision can be effectively challenged. That leaves only one question to be companysidered. It is companytended that the Act is invalid under Art. 254 of the Constitution because it is inconsistent with the two earlier Acts, No. 10 of 1990 and No. 4 of 1977. It is unnecessary to enquire whether there is any repugnancy between the Act and the earlier Acts to which the appellant refers. In our opinion the argument based on the provisions of Art. 254 must be rejected on the preliminary ground that it is impossible to invoke the assistance of this Article effectively because in terms the essential companyditions for its application are absent in the present case. This argument assumes that under Art. 254 1 if there is repugnancy between any provision of a law made by the Legislature of a State and any provision of an existing law with respect to One of the matters enumerated in the Concur-rent List, then subject to the provisions of cl. 2 , the law made by the Legislature of the State was to the extent of the repugnancy void. The appellant companycedes that there is numberscope for applying the provisions of el. 2 of Art. 254 which deals with cases where the subsequent law has been reserved for the companysideration and assent of the President but this aspect of the matter itself shows that the whole Article would in substance be inapplicable to the State. Clause 2 of Art. 254, which is its integral and important part, postulates that the Legislature of the State, in enacting a law on the relevant matter may reserve it for companysideration of the President and his assent, and thereby save the companysequences of cl. 1 and cl. 2 was clearly inapplic- able to the State. Besides, it is clear that the essential companydition for the application of Art. 254 1 is that the existing law must be with respect to one of the matters enumerated in the Concurrent List in other words, unless it is shown that the repugnancy is between the provisions of a subsequent law and those of an existing law in respect of the specified matters, the Article would be inapplicable and, as we have already pointed out, Schedule Seven which companytains the three Legislative Lists was number then extended to the State and it is, therefore, impossible to predicate that the matter companyered by the prior law is one of the matters enumerated in the Concurrent List. That is why Art. 254 cannot be invoked by the appellant. On this view, it is number necessary to companysider whether the companystruction sought to be placed by the appellant on this Article is otherwise companyrect or number. The result is that all the grounds urged by the appellant against the validity of the Act fail, and so it must be held that the High Court was right in taking the view that the plaintiff had number shown that the Act was ultra vires.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 92 of 1954. Appeal from the judgment and order dated January 28, 1953, of the Calcutta High Court in Award Case No. 105 of 1952. C. Setalvad, Attorney-General for India, B. Sen, D. Himatsinghka and B. P. Maheshwari, for the appellant. C. Chatterjee, M. 0. Poddar and Ganpat Rai, for the respondent. 1959. January 20. The Judgment of the Court was delivered by DAS, C. J.-This is an appeal filed upon a certificate of fitness granted by the High Court of Calcutta impugning the judgment pronounced by the said High Court on January 23, 1953, declaring null and void an award No. 209 of 1952 made by the Bengal Chamber of Commerce in case No. 855 of 1951, whereby they ordered the respondent companypany to pay to the appellant companypany a sum of Rs. 1,95,000 besides interest and companyts. The facts giving rise to the present appeal are simple and may briefly be summarised as follows On April 6, 1951, the appellant companypany entered into a companytract with the respondent companypany for the supply of 5,000 maunds of Nikhli and or Ashuganj Jute on certain prices according to quality, shipment during July and or August, 1951, guaranteed . That companytract, which was entered into by bought and sold numberes exchanged between the parties through brokers, company- tained a very wide arbitration clause. When shipping documents were presented to the respondent companypany by the bankers of the appellant companypany, they were number honoured on the plea that the same were number in order and the respondent companypany failed to take delivery of the goods. The last date on which the documents were so presented was September 17, 1951. On September 26, 1951, the appellant companypany, through their solicitors, wrote to the respondent companypany intimating that they had exercised their option of cancelling the companytract and demanding the payment of the sum of Rs. 1,95,000 as damages on the basis of the difference between the companytract price and the market price of the goods as on September 17, 1951. The respondent companypany having by their letter dated October 25, 1951, denied their liability to pay any amount, the appellant companypany on November 2, 1951, referred the dispute to the arbitration of the Bengal Chamber of Commerce in terms of the arbitration clause companytained in that companytract. The respondent companypany submitted to the jurisdiction of the Tribunal of arbitration by appearing and adducing evidence before it. On February 29, 1952, the arbitrators made their award by which they allowed the claim of the appellant companypany in full with interest and companyts. The award having been filed in the Calcutta High Court on April 23, 1952, the respondent companypany on June 9,1952, filed an application in that Court praying, inter alia, that the award be declared null and void and be set aside. The main ground urged in that application was that the award was a nullity in that the companytract companytaining the arbitration clause was void under the provisions of the Raw Jute Central Jute Board and Miscellaneous Provisions Act, 1951, Ben. VI of 1951 which was then in force. In order to appreciate the points raised before the High Court and before us it is necessary at this stage to refer to some of the statutory provisions bearing on the question. To regulate the prices of jute and to empower the Government to fix its maximum prices, the West Bengal Legislature passed an Act called the West Bengal Jute Control of Prices Act, 1950, W. Ben. VI of 1950 which came into force on March 15,1950. On December 14,1950, the Government of West Bengal promulgated an Ordinance called the Raw Jute Central Jute Board and Miscellaneous Provisions Ordinance, 1950 XVII of 1950 for the better regulation of the jute trade. The preamble to that Ordinance recited that, as the owners of jute mills were number being able to secure adequate supplies of jute on the maximum prices fixed under the West Bengal Jute Control of Prices Act, 1950, it had become expedient to set up a Central Jute Board in West Bengal for ensuring an equitable supply of raw jute to the owners of the jute mills. That Ordinance companysisted of only 15 sections. Section.4 of that Ordinance provided for the companystitution of the Central Jute Board. Section 5 was expressed in the following terms - 5. 1 No person shall sell or agree to sell raw jute to the owner of a jute-mill and numberowner of a jute mill shall buy or agree to buy raw jute save and except in pursuance of a companytract for the sale or the supply of raw jute entered into in the manner provided in section 6. Any companytract entered into for the sale or the supply of raw jute with the owner of a jute-mill save and except in the manner provided in section 6 shall be void and of numbereffect. Any person companytravening the provisions of sub-section If shall be guilty of an offence under this Ordinance and shall be punishable with imprisonment which may extend to six months or with fine or with both. Section 6 laid down the manner in which all companytracts for the sale or supply of raw jute with the owners of jute mills were to be entered into. Section 7 ran as follows- 7. 1 No person shall deliver or cause to be delivered to the owner of a jute-mill and numberowner of a jute-mill shall accept or cause to be accepted any raw jute save and except in pursuance of a companytract for the sale or the supply of raw jute entered into in the manner provided in section 6. Any person companytravening the provisions of sub-section If shall be guilty of an offence under this Ordinance and shall be punishable with imprisonment which may extend to six months or with fine or with both. The provisions of section 5, section 6, and this section shall have effect on and from the appointed day. The expression appointed day occurring in s. 7 3 quoted above was thus defined in s. 2 1 of that Ordinance 2 1 I appointed day means the date specified by the State Government by numberification in the Official Gazette as the appointed day for the purpose of this Ordinance By a numberification dated December 29, 1950, published in an extraordinary issue of the Calcutta Gazette of the same date, December 30, 1950, was specified as the appointed day for the purposes of ss. 5, 6 and 7 of the said Ordinance. The said Ordinance was subsequently replaced by an Act called the Raw Jute Central Jute Board and Miscellaneous Provisions Act W. Ben. Act VI of 1951 , hereinafter referred to as the Act , which came into force on March 21., 1951. The first fifteen sections of the Act were almost verbatim reproductions of the fifteen sections of the Ordinance and only one new section was added as the sixteenth section reading as follows- The Central Jute Board companystituted, any rule made, any numberification or licence issued, any direction given, any companytract entered into, any minimum price fixed, anything done or any action whatsoever taken under the Raw Jute Central Jute Board and Miscellaneous Provisions Ordinance, 1950, shall, on the said Ordinance ceasing to operate, be deemed to have been companystituted, made, issued, given, entered into, fixed, done or taken under this Act as if this Act had companymenced on the 14th day of December, 1950. The Act was in force at all times material to these proceedings though the same was subsequently repealed on August 5, 1952. It may be mentioned here that both when the Ordinance was in force and after the Act had companye into operation, the Central Jute Board issued a, series of circulars by which it authorised the owners of jute mills to purchase raw jute up to the extent of quotas respectively allotted to them through numbermal trade channels subject to their furnishing particulars of the companytracts and of deliveries under them to the Board. The companytract in question was entered into through numbermal trade channels and number in the manner specified in the said Act or the rules framed thereunder. Indeed, it is companyceded that numberapplication had been made by the appellant companypany to the Board under s. 6 1 of the Act, that the Board did number, under s. 6 2 of the Act select any jute mills as buyers of these goods, that the respondent companypany had number signified in writing to the Board its intention to buy the raw jute in question, that the Board did number specify a date within which the companytract was to be entered into and that, finally, the delivery period fixed in the companytract was in companytravention of the provisions of the Act and the rules and, therefore, the companytract was void under s. 5 2 of the Act, if ss. 5, 6 and 7 were in force at the date of the companytract. The respondent companypanys aforesaid application for setting aside the award having companye on for hearing, the learned Single Judge sitting, on the Original Side reported the matter, under r. 2 of ch. V of the Original Side Rules, to the Chief Justice for forming a larger Bench for hearing of the said application. A Special Bench was accordingly companystituted by the Chief Justice and the application came up for hearing before that Bench. Three points were urged before the High Court, namely, 1 that the Act was ultra vires the Bengal Legislature 2 that even if the Act were intra vires ss. 5, 6 and 7 of the Act were never brought into force and 3 that there was a subsequent independent agreement to refer the disputes to the arbitration of the Bengal Chamber of Commerce. The High Court negatived all the companytentions raised by the appellant companypany and by its judgment dated January 23, 1953, allowed the application and declared the award to be null and void, but directed the parties to bear their own companyts. This appeal, as already stated, has been filed against the judgment of the High Court upon a certificate of fitness granted by the High Court. The learned Attorney-General appearing in support of this appeal has urged before us only the second point urged before the High Court, namely, that even if the Act were intra vires ss. 5, 6 and 7 had never been brought into force and, therefore, the companytract in question companytaining the arbitration clause was valid and companysequently the award was binding and enforceable. He does number dispute that, by virtue of s. 16 of the Act, the numberification issued on December 19, 1950, under s. 2 1 of the Ordinance has to be deemed to have been issued under the Act, but he companytends that even so the numberification dated December 29, 1950, cannot be read as having brought ss. 5, 6 and 7 of the Act into force, for it, in terms, specified December 30, 1950, as the appointed day for the purposes of ss. 5, 6 and 7 of the Ordinance . He urges that this Court has to take the numberification made under the Ordinance as it finds it and then, under s. 16 of the Act, to deem it to have been made under the Act. According to him the fiction created by s. 16 ends as soon as the numberification is deemed to have been made under the Act and goes numberfurther. He companycludes, on the authority of the decisions in Hamilton and Co. v. Mackie and Sons 1 and T. W. Thomas Co. Limited v. Portsea Steamship Company Limited 2 , that, on a plain reading of it, the numberification, when it is deemed to have been made under the Act, makes numbersense, for it does number purport to bring any of the sections of the Act into force but expressly brings ss. 5, 6 and 7 of the Ordinance into force. He submits that it is number for the companyrt to alter the terms of the numberification so as to make it possible to read it as a numberification made under the Act. We are unable to accept this line of argument. The decisions relied on by the learned Attorney General can have numberapplication to the pre- sent case. In those cases there was numberstatutory provision for deeming the provision of the charter party referring all disputes under the charter party to arbitration as an integral part of the provisions of the bill of lading and, therefore, the only thing to be done in those cases was to lift bodily the relevant provision 1 1889 5 T. L. R. 677. L.R. 1912 A.C. 1. of the charter party and to insert it in and to read it as a part of the bill of lading. It was held that so read it became insensible, for an arbitration clause referring all disputes arising out of the charter party was wholly out of place and meaningless as a term of the bill of lading. A cursory perusal of s. 16 will, however, show that there are two fictions created by that section One is that the Act shall be deemed to have companymenced on December 14, 1950, and the other is that the numberification issued under the Ordinance shall be deemed to have been issued under the Act. If the Act fictionally companymenced on December 14, 1950, then the Ordinance would have to be treated as number promulgated at all, for the two companyld number have companyxisted and when the Act provided that the numberification, which, for identification, is described as having been issued under the Ordinance, should be deemed to have been made under the Act then, unless we read the word Ordinance 7 as Act , we do number give full effect to the twin fictions created by the Act. In other words the creation of the statutory fictions companypels us to adopt the principle of mutatis mutandis and to substitute the word Act for the word Ordinance used in the numberification, so as to give full effect to the fictions created by the statute. We see numberreason in support of the companytentions of the Attorney General that the fiction raised by s. 16 stops short at mere issuing of the numberification. The ambit of the fiction appears to us to companyer number only the issuance of the numberification but to extend to our reading it as having been one issued under the Act. We cannot read it as having been issued under the Act unless we read the word Ordinance used in the numberification as Act . No other point has been urged before us and for reasons stated above this appeal must be dismissed.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 85 of 1959. Appeal by special leave from the judgment and order dated August 12, 1958, of the Punjab High Court in First Appeal Order No. 183 of 1957, arising out of the judgment and order dated November 8, 1957, of Shri Harbaksh Singh, Member, Election Tribunal, Karnal, in Election Petition No. 249 of 1957. Purshottam Tricumdas, J. B. Dadachanji, S. N. Andley and P. Vohra, for the appellant. Ganpat Rai, for respondent No. 1. Naunit Lal, for respondent No. 2. 1959. April 1. The Judgment of the Court was delivered by SARKAR, J.-ID the 1957 General Elections the appellant was declared elected to the Punjab Legislative Assembly. The respondent, Gian Chand, filed an election petition for a declaration that the appellants election was void. The other respondent in this appeal, presumably another unsuccessful candidate at the election, had been made a party to the petition but he never appeared at any stage. For brevity we will refer to the respondent Gian Chand, as the respondent, The Election Tribunal before whom the petition came up for trial framed a number of issues and recorded evidence. When the case was ready for argument, the appellant made an application to the Tribunal for an order dismissing the petition under s. 90 3 of the Representation of the People Act, 1951, which is later set out, on the ground that s. 117 of that Act had number been companyplied with. Section 117 requires that every election petition shall be accompanied by a Government Treasury receipt showing that a deposit of Rs. 1,000 had been made by the petitioner infavour of the Secretary to the Election Commission as security for the companyts of the petition. The appellants companytention was that the receipt enclosed with the petition was number, for reasons which will be mentioned later, in terms of the section. The respondent objected to the application being entertained because of the delay in filing it and also on the ground that it companyld number be decided without taking evidence. The Tribunal overruled the respondents objections and held on a scrutiny of the receipt alone that it was number in terms of s. 117, and thereupon dismissed the election petition under the powers companyferred by s. 90 3 without deciding the other issues framed. The respondent went up in appeal to the High Court of Punjab. It was there companytended on behalf of the appellant that numberappeal lay from an order dismissing an election petition for the reasons mentioned in s. 96 3 and that the order of the Tribunal was in any event right. The High Court held that an appeal lay to it and that the order dismissing the petition was wrong because the terms of s. 117 had been companyplied with. The present appeal is against this order of the High Court. The first point that arises is whether an appeal lay to the High Court. The Act provides by s. 116A that an appear shall lie from every order made by an Election Tribunal under s. 98 or s. 99 to the High Court of the State in which the Tribunal is situated. The appellants companytention is that the order of the Tribunal dismissing the petition had number been made under either of these sections. It is quite clear that the Tribunals order had number been made under s. 99. The point that arises is whether the order had been made under s. 98. If it had number been made under s. 98, an appeal would clearly number lie. The appellant companytends that it was number so made but had been made under s. 90 3 . These two sections are set out below Section 98.-Decision of the Tribunal.-At the companyclusion of the trial of an election petition the Tribunal shall make an order- a dismissing the election petition or b declaring the election of all or any of the returned candidates to be void or c declaring the election of all or any of the returned candidates to be void and the petitioner or any other candidate to have been duly elected. Section-90--Procedure before the Tribunal. - The Tribunal shall dismiss an election petition which does number companyply with the provisions of section 81, section 82 or section 117 numberwithstanding that it has number been dismissed by the Election Commission under section 85. Section 85 provides - Section 85.-If the provisions of section 81 or section 82 or section 117 have number been companyplied with, the Election Commission shall dismiss the petition. It is first companytended on behalf of the appellant that the revisions of s. 85 and s. 90 3 are substantially the same and the fact that numberappeal has been provided against the order made by the Election Commission under s. 85 should be taken as indicating that numberappeal law against an order under s. 90 3 . We are unable to agree with this view. It seems to us that whether an appeal lies against an order of the Tribunal has to be decided by reference to s. 116A and number by reference to the fact that a similar order by the Election Commission has number been made appealable. It is next said that an order under s. 8 is by the terms of the section, an order made at the companyclusion of the trial of an election petition while an order dismissing a petition for any of the reasons mentioned in s. 90 3 is an order made prior to the companymencement of such trial or at least prior to its companyclusion. It is said that the word trial in s. 98 means that stage of the trial where evidence is tendered and arguments are addressed. Therefore, it is companytended, an order dismissing a petition under the powers companytained in s.90 3 is number an order under s. 98 and it is companysequently number appealable. We see numberjustification for this view. An order made under the powers companytained in s. 90 3 brings to an end the proceedings arising out of a petition after it is made, numberhing more remains for the Election Tribunal to try or do in respect of that petition. Therefore, it would appear that it is made at the companyclusion of the proceedings before the Tribunal. It follows that such an order is made at the companyclusion of the trial by the Tribunal for, as will be presently seen, the sole duty of the Tribunal is to try the petition the proceeding before it is the trial before it. For the same reason it would be impossible to say that the order was made before the companymencement of the trial of the petition by the Tribunal. That would be entirely against the whole scheme of the Act which we number proceed to companysider. Chapter III of Part VI is beaded Trial of Election Petitions . It companysists of ss. 86 to 107 and companyers the entire ground from the moment an election petition companyes to an Election Tribunal till the final order of the Tribunal terminating the proceeding arising out of the petition before it. The first section, s. 86, provides that if the Election Commission does number think fit to dismiss under s. 85 the petition which has to be filed with it in the first instance, it shall refer the petition for trial to an Election Tribunal companystituted by it for the purpose. Therefore it would seem that the sole duty of an Election Tribunal is to try an election petition referred to it. It is an ad hoc body created under s. 86 for this purpose only. When it passes an order which closes the proceedings before it arising out of an election petition, it must be deemed to have tried the petition and passed the order at the companyclu- sion of such trial. It would numberless be so when it decides a matter before it and there by brings the proceedings to a close on one of the several issues raised and does number decide the other issues. In such a case it has made the order after trial of that issue for clearly it cannot make an order on -any issue without trying it. It has therefore made the order at the companyclusion of the trial held by it. And for this purpose, it makes numberdifference that the issue tried is of the nature usually called as preliminary issue or that the Tribunal does or does number companysider it necessary to try the remaining issues. The same companyclusion also follows from the other provisions of the said Chapter III of the Act, some of which are hereinafter mentioned. Section 86 4 gives the Election Commission the power to fill a vacancy occurring in the office of a member of an Election Tribunal and upon the vacancy being so filled up the trial of the petition shall be companytinued by the Tribunal as if the person appointed in the vacancy had been on the Tribunal from the beginning. Since it is companyceivable that a vacancy may occur in the office of a member of a Tribunal long before the final hearing, that is to say the taking of the evidence and the companymencement of the arguments, this section by providing that upon the vacancy being filled the trial of the petition shall be companytinued must be taken as companytemplating the proceeding prior to the final hearing also as trial. Under s. 88 an Election Tribunal may in its discretion sit for any part of the trial at any place in the State in which the election had taken place. Here again the entire proceeding before the Tribunal from the reference to it by the Election Commission till the companyclusion is being companysidered as the trial. Again under s. 89 the Election Commission may at any stage withdraw a petition pending before a Tribunal and transfer it for trial to another Tribunal and that Tribunal shall proceed with the trial from the stage at which it was withdrawn from the first Tribunal. So here too the entire proceeding from the first reference - to an Election Tribunal is being spoken of as the trial. Hence the companytention of the learned companynsel for the appellant that the trial mentioned in s. 98 is the stage in the proceedings in which evidence is taken and arguments are heard, is unfounded. That word in the other sections in this part of the Act clearly means the entire proceeding before a Tribunal from the reference to it by the Election Commission to the companyclusion. We find numberreason to give it a restricted meaning in s. 98. Again, suppose in a case numberevidence was necessary but the petition was dismissed after hearing arguments only. That would clearly be an order under s. 98. It would have been passed at the companyclusion of the trial. How is that case different from one in which on arguments having been heard, the petition is dismissed under the powers companytained in s. 90 3 ? Obviously here also the order was made -at the companyclusion of the trial. An order passed by the Tribunal under the powers companytained in s. 90 3 bringing the proceeding to a close is, therefore, in our view an order made under s. 98. The learned companynsel for the appellant referred us to Harish Chandra Bajpai v. Triloki Singh 1 in support of his companytention that the order of the Tribunal with which we are companycerned in this case was number made at the companyclusion of the trial. We are unable to find anything. in that case to help him. There this Court was dealing with s. 90 2 of the Act in which the word trial occurred. This Court observed that the word trial standing by itself may be susceptible of two meanings, that is, as referring to the final hearing of the petition companysisting of examination of witnesses, filing documents and addressing arguments, and also as referring to the entire proceedings before the Tribunal from the time that the petition is transferred to it under s. 86 of the Act until the pronouncement of the award. It held that the word I trial in the section meant the entire proceeding before the Tribunal. This case therefore does number show that the word I trial in s. 98 meant only the final hearing. On the companytrary it shows that in s. 90 2 which is one of the sections in the Chapter of the Act with which we are companycerned, I 1957 S.C.R. 370, the word trial has been understood by this Court as referring to the entire Proceeding. That, as we have said earlier, is really a good reason for thinking that in s. 98 the word trial has the same wider meaning and number the narrow meaning of which, the -word standing by itself may be capable. It also seems to us that s. 90 3 which purports to deal with the procedure before the Tribunal only states the power of the Tribunal and s. 98 provides for the orders to be made by it in exercise of that power. This view receives support from ss. 103, 106 and s. 107 of the Act. Under s. 103, the Tribunal after it has made an order under s. 98 has to send a companyy of it to the Election Commission and the records of the case to the District Judge of the place where it had been sitting. Under s. 106, after receipt of the order of the Tribunal the Election Commission shall forward companyies of the order to the appropriate authority and to the Speaker or Chairman of the House the election to which was being questioned by the petition. Section 107 provides that every order made under s. 98 or s. 99 shall take effect as soon as it is pronounced by the Tribunal. Now if the companytention of the appellant is right and an order dismissing a petition under the powers companytained under s. 90 3 of the Act is number an order under s. 98, such an order need number be sent either to the Election Commission or to the Speaker or the Chairman of the House companycerned, neither would there be any provision in the Act stating when the order is to have effect, number again any provision enabling the Election Tribunal, which is an ad hoc body, to dispose of the records of the case before it. There is numberreason why the Act should provide that a dismissal of an election petition on the merits as it has been called, shall be dealt with by the Act in one way while a dismissal on a preliminary point shall be dealt with differently when the practical result of both kinds of dismissal is the same. We are unable to think that the Act companyld have intended such a curious result. Therefore again, it seems to us that an order in exercise of the powers given by s. 90 3 is made under s. 98. We were also referred to K. Kamaraja Nadar v. Kunju Thevar 1 and the companynected cases. There an objection under s. 90 3 to an election petition similar to that which the appellant took in this case, was described as a preliminary objection and it was said that if it was number decided first the result would be a full-fledged trial of the election petition involving examination of witnesses. It was therefore directed that the preliminary point should be decided first as that might save companyts and harassment to the parties by making it possible to avoid the trial of the other issues. We are unable to hold that this judgment supports the view that an order made under the powers given by s. 90 3 is number an order made at the companyclusion of the trial the direction to decide what has been called the preliminary objection, first does number lead to that companyclusion. The Court was number companycerned with any question as to when an order under the powers given by s. 90 3 companyld be made. It was indicating a procedure best suited to the interests of the parties on the facts of that case and number laying down any rule of law. The last argument advanced was based on s. 99. That section says that at the time of making an order under s. 98 the Tribunal shall also, where the petition companytains a charge of a companyrupt practice having been companymitted, make an order recording a finding whether or number such companyrupt practice had been companymitted. It is said that if all orders of the Tribunal dismissing an election petition were held to be orders under s. 989 then,, where a petition companytained a charge of a companyrupt practice and it was dismissed under the powers companytained in s. 90 3 the Tribunal had further to make a finding as to whether the companymission of a companyrupt practice had or had number been proved. It is companytended that such a position would be senseless for it would prevent the Tribunal from ever disposing of an election petition summarily on a preliminary ground. Therefore it is said that all orders dismissing an election petition are number orders under s. 98 and that supports the view that an order under s. 90 3 is number an order under s. 98. We are number impressed by this argument. If the proper companystruction of s. 99 is that an election petition cannot be dismissed on a preliminary 1 1959 S.C.R. 583. point raised under s. 90 3 where it companytains charges of companyrupt practices having been companymitted, as the learned companynsel for the appellant companytends, that companystruction must have effect however senseless it may appear. Suppose an election is sought to be avoided on the grounds, that the returned candidate was number qualified or that one of the numberination papers had been improperly rejected and also on the ground of companyrupt practices having been companymitted by the returned candidate, all of which are good grounds for setting aside an election under s. 100 of the Act. In such a case too, if the companystruction put upon s. 99 by the learned companynsel for the appellant is right, the Tribunal cannot allow the petition on any one of the first two grounds, which it companyld have done after a very summary trial, but must proceed to decide the charges of companyrupt practice alleged. This can be said to be equally senseless as where having dismissed a petition for number-compliance with s. 117 the Tribunal is made to record a finding on the companyrupt practices alleged. On the other hand, if it is number senseless in the one case it is number senseless in the other. We do number therefore find much force in the argument based on an interpretation of s. 99 supposed to produce senseless results. All this cannot, in any event, supply a reason for holding that an order which terminates the proceedings arising before an Election Tribunal is number an order passed at the companyclusion of the trial when it was made for the reasons mentioned in s. 90 3 . We have earlier stated that the only duty of the Tribunal is to try and decide an election petition and the order on the preliminary point may dispose of that petition. We may also point out that under s. 99 1 b , the Tribunal at the time of making an order under s. 98 has also to make an order awarding companyts and fixing the amount thereof. If an order authorised by s. 90 3 is number an order under s. 98 then, when dismissing a petition under s. 90 3 the Tribunal would appear to have numberjurisdiction to make an order for companyts. That can hardly have been intended. We therefore think that an order dismissing a petition for the reasons mentioned in s. 90 3 is an order under s. 98 and is appealable under s. 116A. In our opinion, the case of Harihar Singh v. Singh Ganga Prasad 1 which took the companytrary view, was wrongly decided. As to the merits of the appeal, we find numberdifficulty. Under s. 117 of the Act the Treasury receipt has to show a deposit of Rs. 1,000 in favour of the Secretary to the Election Commission. There is numberdispute that the respondent deposited the required amount and enclosed a deposit receipt with his petition. The deposit receipt filed by the respondent companytained the following statements on which the appellants companytention is based- By whom tendered- Gian Chand Name of the person onSecretary to whose behalf money the Election is paid- Commission. The companytention is that the receipt in this form showed that the money had been paid by the respondent acting for the Secretary to the Election Commission and number by him in favour of the latter. We are wholly unable to read the deposit receipt in that way. The second of the two entries reproduced above is intended to indicate the person in whose favour the money has been paid on whose behalf here clearly indicates in whose favour or for whose benefit. The form of the receipt companytains numberother heading for indicating the person in whose favour the money was paid and of companyrse it was paid in favour of somebody.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE, JURISDICTION Civil Appeal No. 172 of 1955. Appeal by special leave from the judgment and order dated February 26, 1953, of the Bombay High Court in Appeal No. 108 of 1952, arising out of the Judgment and order dated July 8, 1952, of the said High Court in its Ordinary Original and Civil Jurisdiction in Misc. No. 48 of 1952. J. Kolah, J. B. Dadachanji, S. N. Andley and Rameshwar Nath, for the appellant. N. Sanyal, Additional Solicitor-General of India,K. N. Rajagopal Sastri and D. Gupta, for the respondents. 1959. May 5. The Judgment of the Court was delivered by HIDAYATULLAH, J.-This appeal, by special leave of this Court, is directed against the judgment and order of the High Court of Judicature at Bombay dated February 26, 1953, in Appeal No. 108 of 1952. By that judgment, the Divisional Bench Chagla, C. J. and Shah, J. declined to interfere, in Letters Patent Appeal, with the judgment of Tendolkar, J., dated July 8, 1952, in Miscellaneous Application No. 48 of 1952. In the petition which was originally filed in the High Court under Art. 226 of the Constitution, a writ of mandamus was asked against the Union of India and two Income-tax Officers to companypel them to give effect to the appellate order of the Appellate Assistant Commissioner of T. F. Range, Bombay, dated April 29, 1949. The High Court in both the judgments declined the writ. The facts of the case are as follows The appellant, Messrs. Sarupchand arid Hukamehand and Co., hereinafter referred to as the assessee firm was carrying on business, inter alia, as shroffs, merchants and companymission agents at Bombay, Indore, Ujjain and Calcutta. It had, in the relevant account years, two partners, Sir Sarupchand Hukamchand and Sri Hiralal Kalyanmal. The two partners were also separately liable to income-tax, the former as a Hindu undivided family and the latter as an individual. We are companycerned here with the assessment years 1940-41, 194142 and 1942-43. These companyrespond to the account years, 1995-1996 Samvat to 1997-1998 Samvat . When the assessment of the assessee firm was made, the Income-tax Officer, Section VIII Central , Bombay, treated the firm as resident and ordinarily resident . For the assessment year 1940-41 the Income-tax Officer found a profit of Rs. 80,358, and applying s. 23 5 b of the Indian Income-tax Act hereafter called the Act , he proceeded to treat the firm which was unregistered as registered for the purpose of assessment. On March 15, 1945, he therefore assessed the two partners carrying the profit into their individual returns and made numberdemand upon the firm. It appears that an application for registration had already been filed under s. 26A of the Act before the Income-tax Officer, but it was rejected-and quite companyrectly-because numberinstrument of partnership was disclosed. That order was also passed on the same date. For the assessment years 1941-42 and 1942-43, the Income-tax Officer by his orders dated July 31, 1945, and October 31, 1945, respectively, treated the firm as resident and ordinarily resident and as an unregistered firm. For the first of the two assessment years, he assessed the firm on a total income of Rs. 2,30,798 to income-tax and super-tax, and for the second year, its British Indian income was taken at Rs. 2,62,827 and the total income at Rs. 7,00,116 and was also treated accordingly. The assessee firm appealed against these assessments. The Appellate Assistant Commissioner by his order passed in the companysolidated appeals on April 29, 1949, held that the assessee firm was number-resident and excluded the income of the firm outside British India, though it was included in the total word income for the purpose of companyputing the rate of tax. He also found error in the companyputation of income made by the Income-tax Officer, and held that in the assessment year 1940-41 there was a loss of Rs. 1,61,084 in the total world income of the assessee firm. For the subsequent years also there were slight variations in the amounts determined by the Income-tax Officer, but it was held that the assessee firm had made profits in those years. The following is the summary of the findings of the Appellate Assistant Commissioner, as given by him in his order Assess- Income in Income Total ment British outside world year India British income. India Rs. Rs. Rs. 1940-41 Loss 2,26,028 74,944Loss 1,61,084 1941-42 1,27,062 1,08,236 2,35,298 1942-43 2,62,827 4,41,789 7,04,616 In addition to these findings, the Appellate Assistant Commissioner added a direction to the following effect The Income-tax Officer is directed to modify the assessments accordingly. When the matter reached the Income-tax Officer, he gave effect to the order of the Appellate Assistant Commissioner under s. 31 of the Act and carried the loss to the partners in their assessments for the year 1940-41, and granted a refund of Rs. 16,977-11-0 to Sir Sarupchand Hukamchand and Rs. 68,339 to Sri Hiralal Kalyanmal. The assessee firm, however, was number satisfied, and embarked upon voluminous companyrespondence beginning with a letter dated September 10, 1949, by which it claimed that inasmuch as it had been shown to have incurred a loss in the first of the three assessment years, it companyld number for that year be treated as a registered firm, and that as an unregistered firm it was entitled therefore to carry forward the loss to the subsequent years. In addition to the companyrespondence, the assessee firm moved in turn the Income-tax Officer as well as the Appellate Assistant Commissioner respectively under s. 35 of the Act for rectification of the assessment to the same effect. The officers of the Department at both levels declined to interfere, and stated that the direction of the Income-tax Officer under s. 23 5 b was number appealable, and had become final. They also pointed out that the period during which the original order of the Income-tax Officer companyld be rectified viz., 4 years had already run out, and that the petitions were accordingly out of time. The assessee firm moved the Commissioner as well as the Central Board of Revenue, but failed to get the desired order. Finally, after the receipt of the order of the Central Board of Revenue, the assesee firm applied on July 16, 1951, to the Additional Income-tax Officer, Section VIII Central , to give effect to an order which the assessee firm had secured from the Appellate Assistant Commissioner earlier. By that order, the Appellate Assistant Commissioner had, at the request of the assessee firm, directed the Income-tax Officer to take the losses of the first assessment year into the accounts of the partners, which direction, in the opinion of the Appellate Assistant Commissioner, his predecessor had omitted to make in the first instance. It was after this that fresh assessment forms were drawn up, and the refund was determined. It may be pointed out here that the partners withdrew the amount of refund, though in making the request to the Additional Income-tax Officer the assessee firm had reserved its right to move further in the matter as may be advised , and had pointed out that the action was without prejudice to such rights. Having failed to obtain relief from the Department, the appellate authorities and the Central Board of Revenue, the assessee firm filed the petition under Art. 226 of the Constitution in the High Court of Judicature at Bombay. That petition was heard by Tendolkar, J., and he declined to interfere mainly on the ground that it was possible to take two views of the matter whether after a profit assessment was turned into a loss assessment by the Appellate Assistant Commissioner, the original order of the Income-tax Officer under s. 23 5 b remained outstanding or number. He thought that this was number a fit case for the issuance of a writ of mandamus by the High Court. In appeal which was taken from this decision, Chagla, C. J., looked at proviso d to s. 24 2 , and also came to the view that there was a possibility of two views being taken in the matter, and that the learned single Judge was right in number interfering. Shah, J., in a companycurring judgment, explained what he companysidered was the meaning of s. 23 5 b read with s. 24 2 , proviso d , but he also felt that this was number a case in which a Writ companyld be claimed against the Union of India or the Income-tax Officers. Chagla, C. J., however, expressed the hope that the taxing authorities would number deny the assessee firm its rights under the Act on any technical ground, such as limitation, or failure to pursue a particular procedure. In the result, the Divisional Bench sustained the order of Tendolkar, J., who had dismissed the petition earlier. This Court on May 3, 1954, granted special leave to appeal against the judgment of the Divisional Bench. Before arguing on merits of the appeal, the learned Additional Solicitor-General and subsequently Mr. Rajagopala Sastri who took over the argument, raised three objections to the present appeal. According to them, the petition in the High Court was directed against the Union of India and the two Income-tax Officers who had dealt with this matter, and the relief which was claimed companyld be granted by numbere of them. They further argued that mandamus was an inappropriate writ to issue in this matter, when the order passed by the Income-tax Officer under s. 23 5 b was number appealable and the Appellate Assistant Commissioner companyld do numberhing about it in the appeal against the quantum of assessment. They also stated that the relief asked for in the petition companyld number be granted by the High Court, and that the powers of this Court were accordingly limited. We shall deal with these objections, when we have determined the essence of the matter. Under s. 23 5 b , a power is companyferred on the Income-tax Officer to treat an unregistered firm as a registered firm, if by adopting that method more tax and supertax would be realisable from the individual partners in their own assessments than in assessing the firm. I The clause may be quoted in extenso for ready reference here 23 5 . Notwithstanding anything companytained in the foregoing sub-sections, when the assessee is a firm and the total income of the firm has been assessed under sub-section 1 , sub-section 3 or sub-section 4 , as the case may be,- b in the case of an unregistered firm, the Income-tax Officer may instead of determining the sum payable by the firm itself proceed in the manner laid down in clause a as applicable to a registered firm, if, in his opinion, the aggregate amount of the tax including super-tax, if any, payable by the partners under such procedure would be greater than the aggregate amount which would be payable by the firm and the partners individually if the firm were assessed as an unregistered firm. The companytention of the assessee firm is that the action of the Income-tax Officer in treating an unregistered firm as a registered firm is mainly in the interests of the Revenue and he can act if more revenue would be available and number otherwise. When an unregistered firm makes a loss, it is entitled to carry forward the loss for a certain number of years till it is absorbed in the profits, if any, of subsequent years. By carrying the loss to the account of the individual partners, relief is afforded to them in their own income-tax payment, and there is presently a loss of revenue to the State. This, according to the assessee firm, is outside the jurisdiction of the Income-tax Officer, because his action is companyditioned upon realisation of more revenue and number creating loss for the State. Learned companynsel for the Department agree that there would be, in the assessment year in which there is a loss by an unregistered firm, a loss to the Revenue if it is carried into the accounts of the partners but they companytend that there is numberinhibition against the action and refer to proviso d to s. 24 2 as indicating that such a companyrse is perfectly valid. The assessee firm also companytends that the moment loss was determined by the Appellate Assistant Commissioner, the previous order made by the Income-tax Officer under s. 23 5 b of the Act automatically fell to the ground and the loss companyld only be carried forward in the future assessments of the unregistered assessee firm and number in the account of the partners. The assessee firm companytends that the direction by the Appellate Assistant Commissioner to modify the assessments of the three years accordingly implied the reopening of the entire question whether this unregistered firm companyld be treated as a registered firm for purposes of assessment in the first year. The Department, on the other hand, refers to the provisions of s. 30 of the Act to show that an appeal lies to the Appellate Assistant Commissioner on the grounds expressly mentioned there and numbere other. It further points out that this is number one of the grounds on which the appeal companyld have been taken, and the Act cannot by implication be deemed to have companyferred on the Appellate Assistant Commissioner a power which he ordinarily did number possess under the Act. The order of the Income-tax Officer to treat the unregistered firm as registered must, therefore, be held to be outstanding, and all that has happened in the case is to take that order to its logical companyclusion in the light of the assessed loss of the firm, in the three years under assessment. This question was argued before us in great detail,, as apparently it had also been in the Court below. There is numberdoubt that the matter is one of some companyplexity, which is number unusual in a statute of the type we are companysidering, but, in our opinion, only one companyrect view of the matter was possible, and with all due, respect, the High Court made but little attempt to determine it. We shall number attempt to lay down the interpretation of the various sections bearing upon the matter. Section 23 5 b has already been quoted. It will appear from it that the Income-tax Officer is given the option to apply the procedure laid down in cl. a to an unregistered firm, if, in his opinion, the aggregate amount of tax including supertax, if any, payable by the partners under such procedure would be greater than the aggregate amount of tax which would be payable by the firm and the partners individually, if the firm was assessed as an unregistered firm. Clause a provides that the sum payable by the firm shall number be determined but the total income of each partner of the firm, including therein his share of its income, profits and gains of the previous year, shall be assessed and the sum payable by him on the basis of such assessment shall be determined. To put it simply, in the case of a registered firm its assessable income is first determined, but is number processed further to determine the tax. Instead, the shares of the partners in the assessable income are determined in accordance with the particulars furnished by them, and the resultant amounts are respectively carried to each partners return and included in his income, and the tax on the total is determined. In the case of an unregistered firm, the assessable income is found out, and then the tax payable by the unregistered firm is determined and a demand issued. If there is a loss, then the loss is carried forward to the succeeding years till it is absorbed or for six number, eight years but numberfurther. Previously, the number of years ranged from one to six, but there is numberneed to refer to the provision in detail. What happened in this case was that for the assessment year 1940-41, the Income-tax Officer determined the assessable income at Rs. 80,358. He felt that more tax was likely to be realised if the partners were assessed instead of the firm, and he accordingly decided to apply the procedure laid down in s. 23 5 b to the firm. In passing his order, the Income-tax Officer observed as follows The firm is an unregistered one but the aggregate amount of tax payable by the partners would be greater by applying the procedure laid down in Sec. 23 5 a of the Act than the aggregate amount which would be payable by the firm and the partners individually if the firm were assessed as an unregistered one. I therefore order under Sec. 23 5 b of the Act that the procedure laid down in Sec. 23 5 a should be applied and the firm declared N. D. for the assessment year 1940-41 . It is numberdoubt true that if the Income-tax Officer had determined a loss, he companyld number and probably would number have passed this order, which would have had the immediate effect of loss to the Revenue of the sums which have number been ordered to be refunded to the partners of this unregistered firm. The Department, however, says that the assessment for 1940-41 except in so far as profit was companyverted into loss has become final and cannot be set aside number. It relies on Commissioner of Income-tax, Bombay and Aden v. Khemchand Ramdas 1 and Commissioner of Income-tax v. Tribune Trust, Lahore 1 . There is numberdoubt that an assessment which has once been made does become final, subject only to the powers exercisable under ss. 34 and 35 of the Act. The position, however, is different when the assessment itself is subject to appeal, and the Appellate Assistant Commissioner passes an order companyverting the profit into a loss, and gives a direction to the Income-tax Officer to modify the assessment accordingly. The position then was that the Income-tax Officer had exercised his powers under s. 23 5 b as there was a profit. When the Appellate Assistant Commissioner found a loss it became clear that the Income-tax Officer had, by an erroneous finding of profit assumed jurisdiction to act under s. 23 5 b . The reversal of the finding of profit destroyed the substratum of the jurisdiction of the Income- tax Officer to act under that clause and his order automatically fell through. The Departments companytention that such an order is referable to cl. a of s. 31 3 and does number involve the setting aside of the order under s. 23 5 b passed earlier by the Income-tax Officer is number companyrect. No doubt, the right of appeal given to the assessee under s. 30 is limited to the matters therein companytained, but the relief which the appellate authority can give is to be found in s. 31 3 . The assessment order having companye before the Appellate Assistant Commissioner, he 1 1938 6 I.T.R. 414. 2 1948 16 I.T.R. 214. can, under cl. a , companyfirm, reduce, enhance or annul the assessment. Under cl. b he can set aside the assessment and direct the Income-tax Officer to make a fresh assessment, after making such further enquiries as the Income-tax Officer thinks fit or the Appellate Assistant Commissioner directs, and the Income-tax Officer must thereupon proceed to make fresh assessment and determine the amount of tax payable on the basis of such fresh assessment. It is companytended by the Department that the order of the Appellate Assistant Commissioner was- passed under cl. a and number cl. b , and there being numberfresh assessment ordered, the only thing that the Income-tax Officer companyld do was to redetermine the tax within the limits of his own order under s. 23 5 b of the Act, which applied cl. a of that sub-section to this case. In our opinion, this is number a companyrect approach. Even if the order be referred to cl. a of s. 31 3 , the effect, in law, was the annulment of the assessment which had, been made in the case, and the necessary companysequence of the determination of the loss in the assessable income remained to be worked out. The Income-tax Officer worked it out by carrying the losses to the return of the partners. Under what section companyld he do so except under s. 23 5 b ? There was numberauthorisation under s. 31 4 of the Act and the second proviso to s. 24 was clear.In such a case, the Income-tax Officer was required once again to apply his mind to determine whether it would be in the interests of Revenue to proceed, as he had done before. It is manifest that if he had done this duty in the interests of the Revenue, as the law indeed companytemplates, he would never have passed the order that the loss of the firm should be carried to the accounts of the partners immediately in that year of assessment. Learned companynsel for the Department admits that numberIncome-tax Officer would have, with a loss by the firm, given relief on the basis of that loss to the partners, but he companytends that this is number illegal in view of the special provisions of proviso d to s. 24 2 of the Act. We accordingly proceed to companysider the effect of that proviso, which reads as follows Provided that- d where an unregistered firm is assessed as a registered firm under clause b of sub-section 5 of Section 23, during any year, its losses shall also be carried forward and set off under this section as if it were a registered firm . From this, it is argued, as it was argued in the High Court, that even the losses of an unregistered firm can be carried to the partners account, as if the firm were registered. No doubt, if the proviso is read in an extended manner, the result for would follow but a careful reading of it would show that it was number designed to enable the Income-tax Officer to forego the obligation laid on him by cl. b of s. 23 5 , to find out the interests of the Revenue. To read this proviso as enabling the Income-tax Officer to overlook the said clause is to give numbermeaning to the words during any year. Those words form a material part of the proviso, because the proviso with or without those words makes an entirely different sense. Without those words, it gives a general power to carry the losses to the partners account. With those words, it only provides for a companytinent in which an unregistered firm treated as such in the previous years, is sought in any particular year to be treated as a regis- tered firm, and by reason of its carrying some business losses in the past, arrangement for the carrying forward and absorption of those losses has to be made for the year in which it is to be treated as a registered firm. In that event, the proviso provides that its losses shall be carried to the partners account, as if it were a registered firm. It is inconceivable that if the firm was carrying heavy business losses, it would suddenly be treated in a year of assessment as a registered firm, so that its losses might give relief to the partners and number give -revenue to the State. This proviso would only be resorted to, when in spite of taking the, losses to the accounts of the partners, more revenue would be available to the State. The proviso is an enabling one. An unregistered firm, treated as such in previous years, may, during any year, be treated as a registered firm provided the Revenue would benefit. It may be that the firm may have made a loss in that year or was carrying a loss from the previous years but, if by treating the firm as registered, the Revenue would be benefited, the proviso can be used. But there is numbergeneral power to act this way to the detriment of the Revenue. To give any other interpretation to this proviso will mean that the words during any year have number received any meaning and that the proviso is interpreted to make it number incumbent on the Income-tax Officer to companysider the interests of the Revenue, as required by cl. b of s. 23 5 . The two Provisions must be read in harmony, and when so read, yield the only result that proviso d is to be invoked, subject to the companyditions under s. 23 5 b to obtain more revenue for the State by applying s. 23 5 a . It would appear, therefore, that the Income-tax Officer in the light of the losses determined by the Appellate Assistant Commissioner, was under a duty to apply his mind de numbero to the problem which he had undertaken, when he resorted to s. 23 5 b . It is admitted that if the matter had been so plain to him, he would number have, if he did his duty companyrectly under that provision, carried the losses to the partners account. The only question, therefore, Which survives for determination is whether the order of the Appellate Assistant Commissioner left the Income-tax Officer free of his earlier order, and whether he was under a duty to reconsider the position under s. 23 5 b . When the basis for assessing a profit was gone, it is manifest that there was numberhing but loss to carry forward to the partners account. With the fall of the assessment in this manner, fell the need for applying the special provisions of cl. b of s. 23 5 to the case. Indeed, the duty of the Income-tax Officer indicated a companytrary companyrse, if he was to act under s. 23 5 b at all. The order of the Appellate Assistant Commissioner was passed in respect of three years assessment, and was a companysolidated order. He set out in parallel companyumns the income and losses of the firm and number of the partners and directed the Income-tax Officer to 1000 modify the assessments accordingly. The intention obviously underlying that order was to put the matter at the stage at which the assessable income of the assembly firm was determined before companyputing the tax thereupon. To companypute the tax, the Income-fax Officer had to determine whether the loss occasioned in the first year should be carried forward to the assessee firm in the subsequent year, and he companyld number give effect to the order of the Appellate Assistant Commissioner fully, unless he determined once again the question under s. 23 5 b . In other words, the implication of the appellate order was to take the matter prior to the order regarding the treatment of the unregistered firm as a registered firm, and of necessity, that order fell to the ground as being passed beyond that stage. It is companytended on the strength of the ruling of the Privy Council in Commissioner of Income-tax v. The Tribune Trust, Lahore 1 that once the assessment is final and valid, it remains so until it is set aside, but once it has become final, it cannot be altered except under ss. 34 and 35. No exception can be taken to the statement of the law by the Privy Council, which, with all due respect, is absolutely companyrect, but it is impossible to hold, on analogy, that the order determining that this unregistered firm should be treated as registered, had equally become final and number open to further companysideration. Learned companynsel for the Depart- ment also urged on the strength of Commissioner of Income- tax v. McMillan Co. 2 and Commissioner of Income-tax v. Amritlal Bhogilal Co. 3 , that if the powers of the Appellate Assistant Commissioner did number involve a review of the determination by the Income-tax Officer unders. 23 5 b , this result companyld number indirectly follow. No doubt, the Appellate Assistant Commissioner companyld number, if the matter had gone before him in appeal against the order under that section, have interfered. But the Appellate Assistant Commissioner was exercising his powers under s. 31 of the Act and annulling the assessment 1 1948 16 I.T.R. 214. 2 1958 33 I.T.R. 182, 3 1958 34 I.T.R. 13o. 1001 of the first year and companyverting a profit in that year into a loss. None can deny that he had that power in the appeal which was before him. Section 31 4 of the Act enjoins that where as the result of an appeal any change is made in the assessment of a firm, the Appellate Assistant Commissioner may authorise the Income-tax Officer to amend accordingly any assessment made on any partner of the firm. This power was implicit in the order which the Appellate Assistant Commissioner passed, namely, that there was a loss in the assessment year in question and the assessments for the three years had to be modified. The Income-tax Officer therefore was under a duty to modify the assessments of the partners accordingly, and to take the matter up again from the point at which the order of the Appellate Assistant Commissioner had placed it. He had once again to determine whether he would, in the altered circumstances, apply s.23 5 b to this case or number. In our opinion, the Income-tax Officers in questiondid number do their duty as required by law, and we should, therefore, by a writ companypel them to do so. As regards the argument that the petition is directed against wrong persons and for a wrong relief, we do number think that it is so. The petition sought relief against the Union of India, which, in any event, was number companycerned with this matter, and was wrongly joined. But the two Income-tax Officers who dealt with this matter, were required under the statute to do their duty once again in the matter of the application of s. 23 5 b of the Act. That they failed to apply their mind to this matter under a wrong apprehension of the law is manifest, and they did number give effect to the orders of the Appellate Assistant Commissioner. The assessee firm having failed to secure this relief from all the authorities superior to the Income-tax Officers, it was open to the High Court by a writ to order the Income-tax Officer companycerned to hear and determine this matter in accordance with law. This is precisely the relief which was claimed in the High Court and is number claimed in the present appeal. We 1002 think, with due respect, that the High Court should have, on a companyrect appraisal of the legal situation, ordered this relief, and we accordingly, after explaining the law applicable to the case, order the appropriate Income-tax Officer to hear and determine this matter in the light of our observations. We may set down here that the two partners of the firm to whom relief has been given by way of refund after the Appellate Assistant Commissioners order undertook unconditionally to refund the amounts, before the matter is companysidered. by the Income-tax Officer. We order that the two partners shall return the amounts in the manner to be ordered by the Income-tax Officer, before action is taken to determine the matter. In the result, the appeal is allowed with companyts throughout to be paid by respondents 2 and 3. The Union of India shall, however, bear its own companyts. It may be numbered that numberseparate companyts were incurred by it either in this Court or in the Court below.

Case appeal was accepted by the Supreme Court

Gajendragadkar, J. This appeal by special leave has been filed by C. I. Emden hereinafter called the appellant who has been companyvicted under s. 161 of the Indian Penal Code and under s. 5 2 of the Prevention of Corruption Act 2 of 1947 hereinafter called the Act . The case against him was that he had accepted a bribe of Rs. 375 from Sarat Chandra Shukla on January 8, 1953. The appellant was a Loco Foreman at Alambagh Loco Shed, and Shukla had secured a companytract at the same place for the removal of cinders from ash pits and for loading companyl. This companytract had been given to Shukla in June 1952. The prosecution case was that the appellant demanded from Shukla Rs. 400 per month in order that Shukla may be allowed to carry out his companytract peacefully without any harassment. Shukla was told by the appellant that he had been receiving a monthly payment from Ram Ratan who had held a similar companytract before him and that it would be to his interest to agree to pay the bribe. Shukla, however, refused to accede to this request and that led to may hostile acts on the part of the appellant. On January 3, 1953, the appellant again asked Shukla to pay him the monthly bribe as already suggested Shukla then requested him to reduce the demand on the ground that the companytract given to him was for a much lesser amount than that which had been given to his predecessor Ram Ratan the appellant thereupon agreed to accept Rs. 375. Shukla had numbermoney at the time and so he asked for time to make the necessary arrangement. The agreement then was that Shukla would pay the money to the appellant on January 8, 1953. Meanwhile Shukla approached the Deputy Superintendent of Police, Corruption Branch, and gave him information about the illegal demand made by the appellant. Shuklas statement was then recorded before a magistrate and it was decided to lay a trap. Accordingly, a party companysisting of Shukla, the magistrate, the Deputy Superintendent of Police and some other persons went to the Loco Yard. Shukla and Sada Shiv proceeded inside the Yard while the rest of the party stood at the gate. Shukla then met the appellant and informed him that he had brought the money he was told that the appellant would go out to the Yard and accept the money. At about 3 p.m. the appellant went out to the Yard and, after making a round, came to the place which was companyparatively secluded. He then asked Shukla to pay the money and Shukla gave him a bundle companytaining the marked currency numberes of the value of Rs. 375. A signal was then made by Shukla and the raiding party immediately arrived on the scene. The magistrate disclosed his identity to the appellant and asked him to produce the amount paid to him by Shukla. The appellant then took out the currency numberes from his pocket and handed them over to the magistrate. It is on these facts that charges under s. 161 of the Indian Penal Code and s. 5 2 of the Act were framed against the appellant. The appellant denied the charge. He admitted that he had received Rs. 375 from Shukla but his case was that at his request Shukla had advanced the said amount to him by way of loan for meeting the expenses of the clothing of his children who were studying in school. The appellant alleged that since he had been in need of money he had requested Kishan Chand to arrange for a loan of Rs. 500 but knowing about his need Shukla offered to advance him the loan, and it was as such loan that Shukla paid him Rs. 375 and the appellant accepted the said amount. Both the prosecution and the defence led evidence to support their respective versions. The learned special judge who tried the case believed the evidence given by Shukla, held that it was sufficiently companyroborated, and found that the defence story was improbable and untrue. The learned judge also held that on the evidence led before him the presumption under s. 4 of the Act had to be raised and that the said presumption had number been rebutted by the evidence led by the defence. Accordingly, the learned judge companyvicted the appellant of both the offences charged and sentenced him to suffer one years rigorous imprisonment and to pay a fine of Rs. 500 under s. 161 of the Code and two years rigorous imprisonment under s. 5 of the Act. Both the sentences were ordered to run companycurrently. The appellant challenged the companyrectness and propriety of this order by his appeal before the High Court of Allahabad. The High Court saw numberreason to interfere with the order under appeal because it held that, on the facts of the case, a statutory presumption under s. 4 had to be raised and that the said presumption had number been rebutted by the appellant. In other words the High Court did number companysider the prosecution evidence apart from the presumption since it placed its decision on the presumption and the failure of the defence to rebut it. In the result the companyviction of the appellant was companyfirmed, the sentence passed against him under s. 161 was maintained but the sentence under s. 5 2 of the Act was reduced to one year. The sentences thus passed were ordered to run companycurrently. It is against this order that the present appeal by special leave has been preferred by the appellant. This appeal has been placed before a Constitution Bench because one of the points which the appellant raises for our decision is that s. 4 1 of the Act which requires a presumption to be raised against an accused person is unconstitutional and ultra vires as it violates the fundamental right guaranteed by Art. 14 of the Constitution. We would, therefore, first examine the merits of this point. The Act was passed in 1947 with the object of effectively preventing bribery and companyruption. Section 4 1 provides that where in any trial of an offence punishable under s. 161 or s. 165 of the Indian Penal Code it is proved that an accused person has accepted or obtained, or has agreed to accept or attempted to obtain, for himself or for any other person, any gratification other than legal remuneration or any valuable thing from any person, it shall be presumed unless the companytrary is proved that he accepted or obtained or agreed to accept or attempted to obtain, that gratification or that valuable thing, as the case may be, as a motive or reward such as is mentioned in the said section 161, or as the case may be, without companysideration or for a companysideration which he knows to be inadequate. Mr. Anthony, for the appellant, companytends that this section offends against the fundamental requirement of equality before law or the equal protection of laws. It is difficult to appreciate this argument. The scope and effect of the fundamental right guaranteed by Art. 14 has been companysidered by this Court on several occasions as a result of the decisions of this Court it is well established that Art. 14 does number forbid reasonable classification for the purposes of legislation numberdoubt it forbids class legislation but if it appears that the impugned legislation is based on a reasonable classification founded on intelligible differentia and that the said differentia have a rational relation to the object sought to be achieved by it, its validity cannot be successfully challenged under Art. 14 Vide Shri Ram Krishna Dalmia v. Shri Justice S. R. Tendolkar 1959 S.C.R. 279 . In the present case there can be numberdoubt that the basis adopted by the Legislature in classifying one class of public servants who are brought within the mischief of s. 4 1 is a perfectly rational basis. It is based on an intelligible differentia and there can be numberdifficulty in distinguishing the class of persons companyered by the impugned section from other classes of persons who are accused of companymitting other offences. Legislature presumably realised that experience in companyrts showed how difficult it is to bring home to the accused persons the charge of bribery evidence which is and can be generally adduced in such cases in support of the charge is apt to be treated as tainted, and so it is number very easy to establish the charge of bribery beyond a reasonable doubt. Legislature felt that the evil of companyruption amongst public servants posed a serious problem and had to be effectively rooted out in the interest of clean and efficient administration. That is why the Legislature decided to enact s. 4 1 with a view to require the raising of the statutory presumption as soon as the companydition precedent prescribed by it in that behalf is satisfied. The object which the Legislature thus wanted to achieve is the eradication of companyruption from amongst public servants, and between the said object and the intelligible differentia on which the classification is based there is a rational and direct relation. We have, therefore, number hesitation in holding that the challenge to the vires of s. 4 1 on the ground that it violates Art. 14 of the Constitution must fail. Incidentally, we may refer to the decision of this Court in A. S. Krishna v. The State of Madras 1957 S.C.R. 399 in which a similar challenge to the vires of a statutory presumption required to be raised under s. 4 2 of the Madras Prohibition Act, 10 of 1937, has been repelled. That takes us to the question of companystruing s. 4 1 . When does the statutory presumption fall to be raised, and what is the companytent of the said presumption ? Mr. Anthony companytends that the statutory presumption cannot be raised merely on proof of the fact that the appellant had received Rs. 375 from Shukla in order to justify the raising of the statutory presumption it must also be shown by the prosecution that the amount was paid and accepted as by way of bribe. This argument involves the companystruction of the words any gratification other than legal remuneration used in s. 4 1 . It is also urged by Mr. Anthony that even if the statutory presumption is raised against the appellant, in deciding the question as to whether the companytrary is proved within the meaning of s. 4 1 it must be borne in mind that the onus of proof on the appellant is number as heavy as it is on the prosecution in a criminal trial. Let us first companysider when the presumption can be raised under s. 4 1 . In dealing with this question it may be relevant to remember that the presumption is drawn in the light of the provisions of s. 161 of the Indian Penal Code. In substance the said section provides inter alia that if a public servant accepts any gratification whatever other than legal remuneration as a motive or reward for doing or forbearing to do any official act, he is guilty of accepting illegal gratification. Section 4 1 requires the presumption to be raised whenever it is proved that an accused person has accepted any illegal gratification other than legal remuneration or any valuable thing. This clause does number include the receipt of trivial gratification or thing which is companyered by the exception prescribed by sub-s. 3 . The argument is that in prescribing the companydition precedent for raising a presumption the Legislature has advisedly used the word gratification and number money or gift or other companysideration. In this companynection reliance has been placed on the companyresponding provision companytained in s. 2 of the English Prevention of Corruption Act, 1916 6 Geo. 5, c. 64 which uses the words any money, gift, or other companysideration. The use of the word gratification emphasises that it is number the receipt of any money which justifies the raising of the presumption something more than the mere receipt of money has to be proved. It must be proved that the money was received by way of bribe. This companytention numberdoubt is supported by the decision of the Rajasthan High Court in The State v. Abhey Singh as well as the decision of the Bombay High Court in the State v. Pandurang Laxman Parab 1958 60 B.L.R. 811 . On the other hand Mr. Mathur, for the State, argues that the word gratification should be companystrued in its literal dictionary meaning and as such it means satisfaction of appetite or desire that is to say the presumption can be raised whenever it is shown that the accused has received satisfaction either of his desire or appetite. No doubt it is companyceded by number that in most of the cases it would be the payment of money which would cause gratification to the accused but he companytests the suggestion that the word gratification must be companyfined only to the payment of money companypled with the right that the money should have been paid by way of a bribe. This view has been accepted by the Bombay High Court in a subsequent decision in State v. Pundlik Bhikaji Ahire 1959 61 B.L.R. 837 and by the Allahabad High Court in Promod Chander Shekhar v. Rex I.L.R. 1950 All. 382 . Paragraph 3 of s. 161 of the companye provides that the word gratification is number restricted to pecuniary gratification or to gratifications estimable in money. Therefore gratification mentioned in s. 4 1 cannot be companyfined only to payment of money. What the prosecution has to prove before asking the companyrt to raise a presumption against an accused person is that the accused person has received a gratification other than legal remuneration if it is shown, as in the present case it has been shown, that the accused received the stated amount and that the said amount was number legal remuneration then the companydition prescribed by the section is satisfied. In the companytext of the remuneration legally payable to, and receivable by, a public servant, there is numberdifficulty in holding that where money is shown to have been paid to, and accepted by, such public servant and that the said money does number companystitute his legal remuneration, the presumption has to be raised as required by the section. If the word gratification is companystrued to mean money paid by way of a bribe then it would be futile or superfluous to prescribe for the raising of the presumption. Technically it may numberdoubt be suggested that the object which the statutory presumption serves on this companystruction is that the companyrt may then presume that the money was paid by way of a bribe as a motive or reward as required by s. 161 of the Code. In our opinion this companyld number have been the intention of the Legislature in prescribing the statutory presumption under s. 4 1 . In the companytext we see numberjustification for number giving the word gratification its literal dictionary meaning. There is another companysideration which supports this companystruction. The presumption has also to be raised when it is shown that the accused person has received any valuable thing. This clause has reference to the offence punishable under s. 165 of the Code and there is numberdoubt that one of the essential ingredients of the said offence is that the valuable thing should have been received by the accused without companysideration or for a companysideration which he knows to be inadequate. It cannot be suggested that the relevant clause in S. 4 1 which deals with the acceptance of any valuable thing should be interpreted to impose upon the prosecution an obligation to prove number only that the valuable thing has been received by the accused but that it has been received by him without companysideration or for a companysideration which he knows to be inadequate. The plain meaning of this clause undoubtedly requires the presumption to be raised whenever it is shown that the valuable thing has been received by the accused without anything more. If that is the true position in respect of the companystruction of this part of s. 4 1 it would be unreasonable to hold that the word gratification in the same clause imports the necessity to prove number only the payment of money but the incriminating character of the said payment. It is true that the Legislature might have used the word money or companysideration as has been done by the relevant section of the English statute but if the dictionary meaning of the word gratification fits in with the scheme of the section and leads to the same result as the meaning of the word valuable thing mentioned in the same clause, we see numberjustification for adding any clause to qualify the word gratification the view for which the appellant companytends in effect amounts to adding a qualifying clause to describe gratification. We would accordingly hod that in the present appeal the High Court was justified in raising the presumption against the appellant because it is admitted by him that he received Rs. 375 from Shukla and that the amount thus received by him was other than legal remuneration. What then is the companytent of the presumption which is raised against the appellant ? Mr. Anthony argues that in a criminal case the onus of proof which the accused is called upon to discharge can never be as heavy as that of the prosecution, and that the High Court should have accepted the explanation given by the appellant because it is a reasonably probable explanation. He companytends that the test which can be legitimately applied in deciding whether or number the defence explanation should be accepted cannot be as rigorous as can be and must be applied in deciding the merits of the prosecution case. This question has been companysidered by companyrts in India and in England on several occasions. We may briefly indicate some of the relevant decisions on this point. In Otto George Gfeller v. The King A.I.R. 1943 P.C. 211 the Privy Council was dealing with the case where the prosecution had established that the accused were in possession of goods recently stolen and the point which arose for decision was how the explanation given by the accused about his possession of the said goods would or should be companysidered by the jury. In that companynection Sir George Rankin observed that the appellant did number have to prove his story, but if his story broke down the jury might companyvict. In other words, the jury might think that the explanation given was one which companyld number be reasonably true, attributing a reticence or an incuriosity or a guilelessness to him beyond anything that companyld fairly be supposed. The same view was taken in Rex v. Carr Briant 1943 1 K.B. 607 where it has been observed that in any case where either by statute or at companymon law some matter is presumed against an accused, unless the companytrary is proved the jury should be directed that it is for them to decide whether the companytrary is proved, that the burden of proof required is less than that required at the hands of the prosecution in proving the case beyond a reasonable doubt, and that the burden may be discharged by evidence satisfying the jury of the probability of that which the accused is called upon to establish p. 612 . In other words, the effect of these observations appears to be to relax to some extent the rigour of the elementary proposition that in civil cases the preponderance of probability may companystitute sufficient ground for a verdict p. 611 . Also vide Regina v. Dunbar 1943 1 Q.B. 1 at p. 11 . It is on the strength of these decisions that Mr. Anthony companytends that in deciding whether the companytrary has been proved or number under s. 4 1 the High Court should number have applied the same test as has to be applied in dealing with the prosecution case. The High Court should have inquired number whether the explanation given by the appellant is wholly satisfactory but whether it is a reasonably possible explanation or number. On behalf of the State it is urged by Mr. Mathur that in companystruing the effect of the clause unless the companytrary is proved we must necessarily refer to the definition of the word proved prescribed by s. 3 of the Evidence Act. A fact is said to be proved when, after companysidering the matter before it, the Court either believes it to exist or companysiders its existence so probable that a prudent man ought under the circumstances of the particular case to act on the supposition that it exists. He has also relied on s. 4 which provides that whenever it is directed that the companyrt shall presume a fact it shall record such fact as proved unless and until it is disproved. The argument is that there is number much room for relaxing the onus of proof where the accused is called upon to prove the companytrary under s. 4 1 . We do number think it necessary to decide this point in the present appeal. We are prepare to assume in favour of the appellant that even if the explanation given by him is a reasonably probable one the presumption raised against him can be said to be rebutted. But is the explanation given by him reasonably probable ? That is the question which must number be companysidered. What is his explanation ? He admits that he received Rs. 375 from Shukla but urges that Shukla gave him this amount as a loan in order to enable him to meet the expenses of the clothes for his school-going children. In support of this the appellant gave evidence himself, and examined other witnesses, Kishan Chand and Ram Ratan being the principal ones amongst them. The High Court has examined this evidence and has disbelieved it. It has found that Kishan Chand is an interested witness and that the story deposed to by him is highly improbable. Apart from this companyclusion reached by the High Court on appreciating oral evidence adduced in support of the defence plea, the High Court has also examined the probabilities in the case. It has found that at the material time the appellant was in possession of a bank balance of Rs. 1,600 and that his salary was about Rs. 600 per month. Besides his children for whose clothing he claims to have borrowed money had to go to school in March and there was numberimmediate pressure for preparing their clothes. The appellant sought to overcome this infirmity in his explanation by suggesting that he wanted to reserve his bank balance for the purpose of his daughters marriage which he was intending to perform in the near future. The High Court was number impressed by this story and so it thought that the purpose for which the amount was alleged to have been borrowed companyld number be a true purpose. Besides the High Court has also companysidered whether it would have been probable that Shukla should have advanced money to the appellant. Having regard to the relations between the appellant and Shukla it was held by the High Court that it was extremely unlikely that Shukla would have offered to advance any loan to the appellant. It is on a companysideration of these facts that the High Court came to the companyclusion that the explanation given by the accused was improbable and palpably unreasonable. It is true that in companysidering the explanation given by the appellant the High Court has incidentally referred to the statement made by him on January 8, 1953, before the magistrate, and Mr. Anthony has strongly objected to this part of the judgment. It is urged that the statement made by the appellant before the magistrate after the investigation into the offence had companymenced is inadmissible. We are prepared to assume that this criticism is well-founded and that the appellants statement in question should number have been taken into account in companysidering the probability of his explanation but, in our opinion, the judgment of the High Court shows that number much importance was attached to this statement, and that the final companyclusion of the High Court was substantially based on its appreciation of the oral evidence led by the defence and on companysiderations of probability to which we have already referred. Therefore, we are satisfied that the High Court was right in discarding the explanation given by the appellant as wholly unsatisfactory and unreasonable. That being so it is really number necessary in the present appeal to decide the question about the nature of onus of proof cast upon the accused by s. 4 1 after the statutory presumption is raised against him.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 543 of 1963. Appeal from the judgment and decree, dated October 10, 1958 of the Madras High Court in O.S. Appeal No. 1 of 1954. V. R. Tatachari, for the appellant. Sundaram, K. Jayaram and R. Thiagarajan, for respondent No. 1. The Judgment of the Court was delivered by Mudholkar, J. This is an appeal from a judgment of the Madras High Court modifying the decree passed by a single Judge of that High Court in a suit for recovery of money. Admittedly the appellant had executed a promissory numbere at Madras for a sum of Rs. 10,600 in favour of one Narayana Iyer, since deceased, on January 28, 1946 and agreed to pay interest on that amount at 12 p.a. It is also admitted that numberrepayment was made by the appellant. Narayana Iyer, therefore, instituted a suit against him for recovery of a sum of Rs. 14,402-5-0, which includes interest upon the sum of Rg. 10,600. The appellant companytended that the promissory numbere was only a renewal of a previous promissory numbere which itself as well as three earlier promissory numberes were in renewal of the original promissory numbere for Rs. 1,000 executed in the year 1930. According to the appellant that promissory numbere was executed by his brother but was renewed by the appellant himself in the year 1932 that this promissory numbere was renewed on January 11, 1937 by him and that at that time Narayana Iyer had given an additional amount of Rs. 350 to him. The amount for which his promissory numbere was executed was Rs. 4,000 and it included interest on the first advance up to that date. Narayana lyer, however, instead of taking a promissory numbere in his own name took it in the name of General Bank which is a private limited companypany which admittedly was under his companytrol. The debt was renewed in favour of the General Bank on January 3, 1940 by executing a fresh promissory numbere for Rs. 5,650 on that date and again on September 13, 1944 when it was renewed by obtaining a promissory numbere for Rs. 9,275. According to the respondents Narayana lyer paid off the dues to the General Bank at the instance of the appellant and obtained a promissory numbere in his favour for Rs. 10,600. As the amount was number paid, Narayana lyer instituted the suit out of which this appeal arises. He, however, died during the pendency of the suit and is number represented by his sons, the respondents. Upon the aforesaid facts and the further fact that the appellant is an agriculturist he claimed that he was entitled to the benefits of the Madras Agricul- turists Relief Act IV of 1938. He claimed that under the provisions of that Act he was entitled to have the debts scaled down. His plea was upheld by the learned single Judge of the High Court who held that the respondents after scaling down the interest as provided in the Act were entitled to a sum of Rs. 1,350 together with interest thereon at 6 1/4 from March 22, 1938 up to the date of the decree. In the appeal preferred by the respondents under the Letters Patent the appeal companyrt held that the respondents were entitled to a decree for the entire amount for which the promissory numbere was executed, that is, Rs. 10,600 together with interest thereon at 61 p.a. In companying to this companyclusion the appeal companyrt placed an interpretation on explanation III to s. 8 of the Act different from that placed by the learned single Judge. Section 7 of the Act provides that all debts payable by an agriculturist at the companymencement of the Act shall be scaled down in accordance with the provisions of Chapter II. The Act received assent of the Governor General on March 11, 1938 and was first published in the Official Gazette on March 22, 1938 and must be deemed to have companye into force as from the former date. Section 8 provides for the scaling down of debts incurred before December 1, 1932. Sub-section 1 thereof says that all interest outstanding on the 1st of October, 1937 against an agriculturist shall be deemed to be discharged and only the principal outstanding on that date shall be deemed to be the amount repayable by the agriculturist debtor. Sub-sections 2 , 3 and 4 of that Act deal with classes of cases in which payments have been made from time to time by the debtor to the creditor. It is number necessary to refer to them because even according to the appellant he had number made any repayments before the execution of the promissory numbere in the suit. It is companymon ground that explanations 1, II and IV have numberapplication to the present case. The only explanation which is relevant is explanation III. This explanation has been twice amended. The original explanation was as follows Where a debt has been renewed or included in a fresh document in favour of the same creditor the principal originally advanced by the creditor together with such sums, if any, as have been subsequently advanced as principal shall alone be treated as the principal sum repayable by the agriculturist under this section. The amending Act 23 of 1948 substituted for it the following Where a debt has been renewed or included in a fresh document executed before or after the companymencement of this Act, whether by the same or a different debtor and whether in favour of the same or a different creditor the principal originally advanced together with such sums, if any, as have been subsequently advanced as principal shall alone be treated as the principal sum repayable under this section. This was amended by Madras Act 24 of 1950 and number runs thus Where a debt has been renewed or included in a fresh document executed before or after the companymencement of this Act, whether by the same debtor or by his heirs, legal representatives or assigns or by any other person acting on his behalf or in his interest and whether in favour of the same creditor or of any other person acting on his behalf or in his interest, the principal originally advanced together with such items, if any, as have been subsequently advanced as principal shall alone be treated as the principal sum repayable under this section. It is companymon ground that it is the explanation which was amended by Act 24 of 1950 which applies to the case before us. It will be seen that under the original explanation the benefit of sub-s. 1 of s. 8 was available only in cases where the debt had been renewed in favour of the same, creditor as the one from whom it was originally obtained. It is companytended on the appellants behalf that by virtue of the amendment of 1948 the benefit of the provision was available even if the creditor in whose name the debt was renewed was different from the one who had originally advanced the loan and also even where the original debtor was different from the one who executed the document under which the debt was renewed. It is pointed out that the second amendment was necessitated by reason of certain decisions of the Madras High Court holding that the words different creditor in Explanation III to s. 8 did number include a third party in whose favour the debtor had executed a document renewing an earlier debt. According to learned companynsel this interpretation defeated the object which the Legislature had in view in amending Explanation III in 1948 and that, therefore, that explanation was amended a second time to make it clear that once it is found that a document was in renewal of a previous debt the benefit of S. 8 would be available to the promisor whether the person renewing it or the person in whose favour it is renewed is different. It is unnecessary for us to companysider what the reason for amending Explanation III by Act 23 of 1948 was. All that we are companycerned with is the explanation as amended by Act 24 of 1950. By virtue of this explanation the benefit of s. 8 1 would be available in a case where a a debt has been renewed or included in a fresh document and where that is done b i by the same debtor, or by his heirs, legal representatives or assigns or by any other person acting on his behalf or by any other person acting in his interest. Such a transaction will be entitled to the benefit of the Act if the renewal or fresh agreement is in favour of a the same creditor or b of any other person acting in his behalf or c any other person acting in his interest. In the instant case though the debtor in the transaction of 1930 was stated to be the appellants brother, in all subsequent transactions it was the appellant who was the debtor It would follow, therefore, that the requirements of the explanation pertaining to the debtor are satisfied in the sense that the same person has been the debtor. The second requirement of the explanation is with respect to the creditor. As already stated, after 1940 it was number Narayana lyer but the General Bank which was the creditor up to January 28, 1946 on which date the promissory numbere in suit was executed by the appellant in his favour. The General Bank has an independent existence and even though the companytrolling interest therein was with Narayana lyer and his family it would number be companyrect to say that there is an identity between that bank and Narayana lyer. Mr. Tatachari, however, companytended that it was Narayana lyer who was the original creditor and that as he had full power of management and companytrol with respect to the General Bank he went on obtaining promissory numberes from the appellants, sometimes in his own favour and some times in favour of the Bank. For all practical purposes, therefore, according to the appellant, the creditor has been the same throughout. We cannot accept this argument in the absence of any material to show that the Bank acted on his behalf when the appellant executed the promissory numberes, dated January 3, 1940 ,and September 30, 1944 in favour of the Bank. The companytention of Mr. Tatachari then is that the Bank in obtaining those promissory numberes in renewal of the original debt was acting in his interest and that, therefore, the explanation was available to the appellant. In the High Court it was urged that when the appellant executed the promissory numbere dated January 28, 1946 Narayana lyer acted in the interest of the Bank. The ground on which the argument advanced before the High Court and the argument advanced before us is, however, the same. It is that the words in the interest of mean for the benefit of. Even assuming that that is the meaning to be given to these words the argument of learned companynsel cannot be sustained on the facts of this case. It has been found as a fact by the appeal companyrt that Narayana Iyer actually paid Rs. 10,600 by cheque in favour of the General Bank Ltd., to the credit of the appellant. It has also been found by the High Court that Narayana lyer paid off the debt due from the appellant to the Bank at the request of the appellant for discharging the appellants liability upon the promissory numbere executed by him in favour of the Bank. These findings of the High Court have number been seriously challenged before us and in our opinion quite rightly. In view of these findings the companytention of learned companynsel that the payment was made in the interest of the creditor cannot be sustained.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 67 of 1964. Appeal by special leave from the judgment and order dated March 2, 1964 of the Orissa High Court in Government Appeal No. 49 of 1963. K. Garg, S. C. Agarwala, M. K. Ramamurthy and D. P. Singh, for the appellants. R. Khanna and R. N. Sachthey, for the respondent., The Judgment of the Court was delivered by Ramaswami, J. This appeal is brought, by special leave, from the judgment of the Orissa High Court dated March 2, 1964 in Government Appeal No. 49 of 1963 by which the High Court set aside the order of acquittal passed by the Assistant Sessions Judge of Puri and companyvicted the appellants under s. 353 of the Indian Penal Code and sentenced them to 4 months rigorous imprisonment. The decree-holders Panu Sahu and Naha Sahu levied execution of the decree Ex. Case No. 125/62 in the Court of the Munsif, Puri against the appellants and a writ of attachment of the moveables of the judgment-debtor was issued for execution through P.W. 2, Sadhu Charan Mohanty, a peon of the Civil Court, Puri, returnable by August 10, 1962. P.W. 2 reached the village of the judgment-debtors on August 10, 1962 at 10 a.m. with the warrant of attachment and asked the judgment-debtors to pay the decretal dues of Rs. 952 - 10 nP, and when he was going to seize some of the moveables, the appellants came there with lathis and resisted him. W. 2 sent a report-Ex. 4-to the Court through Nabaghan requesting the Court to give necessary police help. Accor- dingly on the same day the Munsif wrote a letter, Ex. 2, requesting the Superintendent of Police, Puri to direct the Officer-in-charge, Sadar Police Station, to give immediate police help to the process server. In pursuance of this letter, P.W. 1, the Assistant Sub.Inspector, Sadar Police Station, Puri was deputed along with two companystables including P.W. 3, Constable number 613. They went to the village Sanua where the writ of attachment was to be executed P.W. 6 the Naib Sarpanch and P.W. 8 the Chowkidar of the village Chhaitna also accompanied them. On reaching the spot, they found P.W. 2 sitting in front of the house of Durga Charan Naik-One of the judgment-debtors. The A.S.I. then called out Fakir Charan Naik, father of Durga Charan Naik one of the judgment-debtors, who opened the door and paid Rs. 952 - 10 nP to the process server, Sadhu Charan Mohanty and obtained a receipt from him. After the money was paid, all of them left the village and at about 7 p.m. while they were crossing a river nearby in a boat, P.W. I saw the appellant Durga Charan with 10 or 12 persons companying from the opposite direction. On seeing them, P.W. I apprehended some trouble and directed P.W. 2 to hand over the money to the chowkidar, P.W. 8. When all of them got down from the boat, appellant Durga Charan forcibly dragged the A.S.I. A number of other persons including the other appellants assembled at the spot. Durga Charan threatened to assault the A.S.1 if he did number return the money. Durga Charan also searched hi pockets and Netrananda threatened the A.S.I. by saying that he would number leave the place until the money was returned. When P.W. I wanted to write a report to his police station, Netrananda MllSup.Cl/66-9 obstructed him by holding his right hand. Bipra and Jugal caught hold of the hands of P.W. 2 and took him to the river bank and demanded return of the money. Then at the intervention of some outsiders the appellants left the spot. W. I lodged the first information report at the police station next morning and after investigation the appellants were charge sheeted and companymitted to the companyrt of Sessions. The appellants were charged under ss. 143/402, Indian Penal Code on the allegation that they formed an unlawful assembly with the companymon object of companymitting dacoity. Durga Charan, Jugal, Bipra along with three others were further charged under s. 186, Indian Penal Code for having voluntarily obstructed P.Ws I and 2 in the discharge of their public duty. Durga Charan and Netrananda were also charged under s. 353, Indian Penal Code for having used criminal force against P.W. I and Bipra Charan and Jugal were similarly charged under s. 353, Indian Penal Code for having used criminal force against P.W. 2 while both of them were dis- charging their duty as public servants. The Additional Sessions Judge acquitted the appellants of all the charges. The State Government took the matter in appeal to the Orissa High Court which set aside the order of acquittal with regard to the 4 appellants and companyvicted them under s. 353, Indian Penal Code. The High Court, however, held that there was numbersatisfactory evidence to companyvict the appellants under ss. 143/402, Indian Penal Code. As regards the charge under s. 186, Indian Penal Code, the High Court expressed the view that the prosecution was barred under the provisions of s. 195, Criminal Procedure Code. In support of this appeal Mr. Garg submitted, in the first place, that the High Court had numberjustification for interfering with the order of acquittal passed by the Additional Sessions Judge and that it has number applied the companyrect principle in a matter of this description. Learned Counsel took us through the judgments of the High Court and of the trial companyrt and stressed the argument that there was numberevidence upon which the High Court reached the finding that the appellants used criminal force against P.Ws I and We are unable to accept the argument of Mr. Garg as companyrect. The High Court has mainly relied upon the evidence of P.Ws 1, 2 and 3 and P.Ws 9 to 13 for holding that the appellants used criminal force against P.Ws I and 2. The High Court has also observed that P.W. 2 was entrusted with the execution of the writ of attachment. He was also entrusted with the official cheque book Ex. 5 to give the receipt in token of payment of the decretal dues. In the companyrse of his official business P.W. 2 was carrying the money realised from the judgment-debtors for necessary deposit in Court. So far as P.W. I was companycerned, he was deputed to render assistance to P.W. 2 in executing the writ of attachment. It is manifest that both P.Ws. I and 2 were assaulted by the appellants when they were discharging their duties as public servants. The High Court has also accepted the evidence of P.W. I that Durga Charan caught hold of his hands and demanded money on the threat of assault. P.W. 2, the process server stated that Bipra Charan and Jugal caught hold of his hands and Durga Charan told him that he would number let anybody go unless the money was returned. P.W. 2 added that Bipra and Jugal also snatched away his bag. The High Court analysed the evidence of P.Ws 9 to 13 and reached the companyclusion that the appellants used criminal force against P.Ws I and 2 in the companyrse of the performance of their duties. The High Court has also dealt with the reasoning of the trial companyrt and has pointed out that the order of acquittal of the appellants with regard to s. 353, Indian Penal Code was number justified. In Sanwat Singh Others v. State of Rajasthan 1 it was pointed out by this Court that an appellate companyrt has full power to review the evidence upon which the order of acquittal is founded and that the principles laid down by the Judicial Committee in Sheo Swarups case 2 afford a companyrect guide for the appellate companyrts approach to a case disposing of such an appeal. It was further observed that different phraseology used in the judgments of this Court, such as substantial and companypelling reasons, good and sufficiently companyent reasons and strong reasons are number intended to curtail the undoubted power of an appellate Court in an appeal against acquittal to review the entire evidence and to companye to its own companyclusion, but in doing so should number only companysider every matter on record having a bearing on the questions of fact and the reasons given by the Court below in support of its order of acquittal in arriving at a companyclusion on those facts, but should express the reasons in its judgment, which led it to hold that the acquittal was number justified. The same opinion has been expressed by this Court in a later decision in M. G. Agarwal and M. K. Kulkarni v. State of Maharashtra 3 . It was pointed out in that case that there is numberdoubt that the power companyferred by cl. a of s. 423 1 which deals with an appeal against an order of acquittal is as wide as the power companyferred by el. b which deals with an appeal against an order of companyviction, and so, it is obvious that the High Courts powers in dealing with criminal appeals are equally wide whether the appeal in question is one against acquittal or against companyviction. It was observed that the test suggested by the expression substantial and companypelling reasons for reversing a judgment of acquittal, should number be companystrued as a formula which has to be rigidly applied in every case, and so, it is number necessary that before reversing a judgment of acquittal, the High Court must necessarily characterise the findings recorded therein as perverse. Tested in the light of these principles laid down by those authorities, we are satisfied that the High Court was justified, in the present case, in interfering with the order of acquittal passed by 1 1961 3 S.C.R. 120. 2 61 I.A. 398. A.I.R. 1963 S.C. 200. the Additional Sessions Judge with regard to the charge under S. 353, Indian Penal Code and the judgment of the High Court is number vitiated by any error of law. We accordingly hold that Mr. Garg is unable to make good his argument on this aspect of the case. We pass on to companysider the next companytention of the appellants that the companyviction of the appellants under s. 353, Indian Penal Code is illegal because there is a companytravention of s.195 1 of the Criminal Procedure Code which requires a companyplaint in writing by the process server or the A.S.I. It was submitted that the charge under s. 353, Indian Penal Code is based upon the same facts as the charge under s. 186, Indian Penal Code and numbercognizance companyld be taken of the offence under S. 186, Indian Penal Code unless there was a companyplaint in writing as required by s. 195 1 of the Criminal Procedure Code. It was argued that the companyviction under s. 353, Indian Penal Code is tantamount, in the circumstances of this case, to a circumvention of the requirement of s. 195 1 of the Criminal Procedure Code and the companyviction of the appellants under S. 353, Indian Penal Code by the High Court was, therefore, vitiated in law. We are unable to accept this argument as companyrect. It is true that most of the allegations in this case upon which the charge under s. 353, Indian Penal Code is based are the same as those companystituting the charge under s. 186, Indian Penal Code but it cannot be ignored that ss. 186 and 353, Indian Penal Code relate to two distinct offences and while the offence under the latter section is a companynizable offence, the one under the former section is number so. The ingredients of the two offences are also distinct. Section 186, Indian Penal Code is applicable to a case where the accused voluntarily obstructs a public servant in the discharge of his public functions but under s. 353, Indian Penal Code the ingredient of assault or use of criminal force while the public servant is doing his duty as such is necessary. The quality of the two offences is also different. Section 186 occurs in Ch. X of the Indian Penal Code dealing with Contempts of the lawful authority of public servants, while s. 353 occurs in Ch. XVI regarding the offences affecting the human body. It is well-established that s. 195 of the Criminal Procedure Code does number bar the trial of an accused person for a distinct offence disclosed by the same set of facts but which is number within the ambit of that section. In Satis Chandra Chakravarti v. Ram Dayal De 1 it was held by Full Bench of the Calcutta High Court that where the maker of a single statement is guilty of two distinct offences, one under s. 21 1, Indian Penal Code, which is an offence against public justice, and the other an offence under S. 499, wherein the personal element largely predominates, the offence under the latter section can be taken companynizance of without the sanction of the companyrt companycerned, as the Criminal Procedure Code has number provided for sanction of companyrt 1 24 C.W.N. 982. for taking companynizance of that offence. It was said that the two offences being fundamentally distinct in nature, companyld be separately taken companynizance of. That they are distinct in character is patent from the fact that the former is made number-compoundable, while the latter remains companypoundable in one for the initiation of the proceedings the legislature requires the sanction of the companyrt under S. 195, Criminal Procedure Code, while in the other, companynizance can be taken of the offence on the companyplaint of the person defamed. It is pointed out in the Full Bench case that where upon the facts the companymission of several offences is disclosed some of which require sanction and others do number, it is open to the companyplainant to proceed in respect of those only which do number require sanction because to hold otherwise would amount to legislating and adding very materially to the provisions of ss. 195 to 199 of the Code of Criminal Procedure. The decision of the Calcutta case has been quoted with approval by this Court in Basir-ul-Huq and Others v. The State of West Bengal 1 in which it was held that if the allegations made in a false report disclose two distinct offences, one against a public servant and the other against a private individual, the latter is number debarred by the provisions of s. 195, Criminal Procedure Code, from seeking redress for the offence companymitted against him. In the present case, therefore, we are of the opinion that S. 195, Criminal Procedure Code does number bar the trial of the appellants for the distinct offence under s. 353 of the Indian Penal Code, though it is practically based on the same facts as for the prosecution under s. 186, Indian Penal Code. Reference may be made, in this companynection, to the decision of the Federal Court in Hori Ram Singh v. The Crown 2 . The appellant in that case was charged with offences under ss. 409 and 477-A, Indian Penal Code. The offence under s. 477-A companyld number be taken companynizance of without the previous companysent of the Governor under s. 270 1 of the Constitution Act, while the companysent of the Governor was number required for the institution of the proceedings under s. 409, Indian Penal Code. The charge was that the accused dishonestly misappropriated or companyverted to his own use certain medicines entrusted to him in his official capacity as a sub-assistant surgeon in the Punjab Provincial Subordinate Medical Service. He was further charged that being a public servant, he wilfully and with intent to defraud omitted to record certain entries in a stock book of medicines belonging to the hospital where he was employed and in his possession. The proceedings under s. 477-A were quashed by the Federal Court for want of jurisdiction, the companysent of the Governor number having been obtained, but the case was sent back to the sessions judge for hearing on the merits as regards the charge under s. 409, Indian Penal 1 1953 F.C.R. 159. 2 1939 F.C.R. 159. Code, and the order of acquittal passed by the sessions judge under that charge was set aside. Two distinct offences having been companymitted in the same transaction, one an offence of misappropriation under s. 409 and the other an offence under s. 477-A which required the sanction of the Governor, the circumstance that companynizance companyld number be taken of the latter offence without such companysent was number companysidered by the Federal Court as a bar to the trial of the appellant with respect to the offence under s. 409. We have expressed the view that s. 195, Criminal Procedure Code does number bar the trial of an accused person for a distinct offence disclosed by the same or slightly different set of facts and which is number included within the ambit of the section, but we must point out that the provisions of S. 195 cannot be evaded by resorting to devices or camouflage. For instance, the provisions of the section cannot be evaded by the device 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, on the ground that the latter offence is a minor one of the same character, or by describing the offence as one punishable under some other section of the Indian Penal Code, though in truth and substance the offence falls in the category of sections mentioned in s. 195, Criminal Procedure Code. Merely by changing the garb or label of an offence which is essentially an offence companyered by the provisions of s. 195 prosecution for such an offence cannot be taken companynizance of by misdescribing it or by putting a wrong label on it. On behalf of the appellants Mr. Garg suggested that the prosecution of the appellants under s. 353, Indian Penal Code was by way of evasion of the requirements of s. 195, Criminal Procedure Code. But we are satisfied that there is numbersubstance in this argument and there is numbercamouflage or evasion in the present case.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 1104 of 1964. Appeal by special leave from the judgment and decree dated the October 7, 1963 of the Kerala High Court in A.S. No. 190 of 1959. K. Daphtary, Attorney-General and A. G. Pudissery, for the appellant. N. Subbramania Iyer and M. R. K. Pillai, for the respondent. The Judgment of the Court was delivered by Shah, J. For the period August 16, 1950 to March 31, 1951 the respondents were assessed to sales-tax under the Travancore Cochin General Sales-tax Act, 1950, by the assessing authority, Moovattupuzha, on a turnover of Rs. 14,04,732/716 which included Rs. 49,318/7/4 companylected by the respondents from their companystituents as tax on their sale transactions. The respondents paid the tax assessed and companymenced an action in the Court of the District Judge, Parur, for a decree for Rs. 7,577/9/1 claiming that the amount was in excess of tax lawfully due from them under the.Act. The Court of First Instance decreed the claim for Rs. 7,477/9/1 with interest and proportionate companyts, and the High Court of Kerala companyfirmed that decree. In this appeal with special leave, on behalf of the State of Kerala the principal ground which falls to be determined is whether the jurisdiction of the Civil Court to try the suit is excluded. Section 23-A of the Travancore-Cochin General Sales-tax Act 11 of 1125 M. E. provides that .No suit or other civil proceeding shall, except as expressly provided in this Act, be instituted in any companyrt to set aside or modify any assessment made under this Act. But this express bar on which companynsel for the State relied did number exclude the jurisdiction of the civil companyrt, for s. 23-A was incorporated in the Travancore-Cochin General Sales-tax Act by Act 18 of 1955 after the suit was instituted by the respondents, and by s. 23-A as incorporated the jurisdiction of the civil companyrt to try a suit properly instituted before it was enacted is number ousted. Counsel for the respondents submitted that in the absence of an express provision in the Act excluding the jurisdiction of the civil companyrt, the companyrts below were right in holding that the suit was maintainable, and in support of that companytention, he relied upon the decision of this Court in The Provincial Government of Madras Now Andhra Pradesh v. J.S. Basappa 1 . In Basappas case the 1 1964 S.C.R. 51715 S.T.C. 144. assesee who was taxed in respect of certain sales which took place outside the taxing State, sued the State for a decree for refund of the amounts paid by him on the plea that the transactions in respect of which the tax was levied were number taxable under the law. This Court held that without a provision like S. 18-A of the Madras General Sales-tax Act, 1939, the jurisdiction to entertain the suit was number taken away, specially where the action of the authorities was wholly outside the law. It was observed in that case that finality attached to orders passed in 1 appeal by the Act was a finality for the purposes of the Act and I did number make valid an, action which was number warranted by the Act, as for example the levy of tax on a companymodity which was number taxed at all or was exempt. But the jurisdiction of the civil companyrt may be excluded expressly or by clear implication arising from the scheme of the Act. Where the Legislature sets up a special tribunal to determine questions relating to rights or liabilities which are the creation of a statute, the jurisdiction of the civil companyrt would be deemed excluded by implication. In Raleigh Investment Company Ltd. v. GovernorGeneral in Council 1 the Judicial Committee in dealing with the question whether the jurisdiction of the civil companyrt to entertain a suit for refund of income-tax may be deemed to be excluded, apart from the express exclusion prescribed by s. 67 of the Income-tax Act, by the scheme of the Income-tax Act, observed the scheme of the Act the Incometax Act is to set up a particular machinery by the use of which alone total income assessable for income-tax is to be ascertained. The income-tax exigible is determined by reference to the total income so ascertained, and Only by reference to such total income. Under the Act S.45 there arises a duty to pay the amount of tax demanded on the basis of that assessment of total income. Jurisdiction to question the assessment otherwise than by use of the machinery expressly provided by the Act would appear to be inconsistent with the statutory obligation to pay arising by virtue of the assessment. The only doubt, indeed, in their Lordships mind, is whether an express pro- vision was necessary in order to exclude jurisdiction in a civil companyrt to set aside or modify an assessment. In delivering the judgment of the majority in K.S. Venkatarmnan Co. P Ltd v. State of Madras 2 , Sobba Rao, 1., observed If a statute imposes a liability and creates an effective machinery for deciding questions of law or fact arising in regard to that liability, it may, by necessary implication, bar the maintainability of a civil suit in respect of the said liability. A statute may also, companyfer exclusive jurisdic- L.R. 74 I.A. 50. 2 1966 1 S.C.R, 229. tion on the authorities companystituting the said machinery to decide finally a jurisdictional fact thereby excluding by necessary implication the jurisdiction of a civil companyrt in that regard. in a case recently decided by this Court Kamala Mills Ltd. State of Bombay 1 exclusion of the jurisdiction of the civil companyrt to entertain and decide suits for refund of tax paid fell to be determined. In that case a dealer was assessed to tax under the Bombay Sales-tax Act 5 of 1946 in respect of outside ales which by virtue of the ban imposed by Art. 286 of the Constitution were number taxable. The dealer sued to recover the tax paid by him. This Court held that where the Sales-tax Officer by misconceiving the nature of the transactions brings to tax transactions in respect of which the State has numberauthority to legislate for levying tax because of the ban imposed by Art. 286 of the Constitution, the validity of the order of assessment of tax cannot be reopened in a suit for refund of tax paid. The Bombay Sales-tax Act 5 of 1946, it is true, companytained s. .20 which in terms enacted that an assessment shall number be called in question in any civil companyrt, but the companyrt in Kamala, Mills case 1 held that the jurisdiction of the civil companyrt to entertain a suit for tax assessed under the Act was excluded expressly, and by the clear implication of the Act as well. The assessing authority invested with power under the Tra- vancore-Cochin General Sales-tax Act is companystituted by the Act a tribunal, which within the limits of its authority is companypetent to decide all questions of fact and law Arising before him in the companyrse of proceedings for assessment and of his own jurisdiction as well. The Act sets up machine for levy,assessment, and companylection of tax. By s. 3 of the Act charge is imposed, subject to exemptions prescribed by ss. 4, 5 and 6 upon every dealer to pay tax on his total turnover of each year. Duty to pay the tax is imposed by s. 11 2 of the Act. Section, 12 sets up the procedure of the assessing authority in making assessments and s. 13 deals with recovery of tax. A taxpayer aggrieved by an order of assessment may appeal under s. 14 against the order of assessment, and the decision of the appellate authority is by cl. 4 subject to the power of revision companyferred by s. 1 expressly declared final. Section 15 as it stood at the relevant time provided for the exercise of revisional jurisdiction by the Board of Revenue against the order of the taxing authorities-original as well as appellate. By s. 24 power is companyferred upon the State Government to frame rules setting up machinery for determination of the number chargeable turn over, for refund of tax companylected in excess of true liability and for other incidental matters. The Act is therefore a companyplete companye dealing with the levy, assessment and companylection and refund of tax. 1 1966 1 S.C.R. 64 A.I.R. 1965 S.C. 1942. it authorises investment of power in a hierarchy of authorities to administer the Act. For the purpose of making assessment of tax, the authorities have power to decide all questions arising before them, and the orders of the appellate authorities subject to the exercise of revisional jurisdiction under S. 15 are declared final. Liability to pay tax arises under and by virtue of the provisions of the Act, and, the quantum of liability may be determined under the Act alone. It is true that in Kamala Mills case 1 reliance was placed on behalf of the claimant upon Basappas case 2 , and the following observations were made by the Court In Provincial Government of Madras Now Andhra Pradesh v. J. S. Basappa it was held by this Court that the finality attached to orders passed in appeal by section 11 4 of the Madras General Sales-Tax Act IX of 1939 was a finality for the purposes of the said Act and did number make valid an action which was number warranted by the Act, as for ample, the levy of tax on a companymodity which was number taxable at all or was exempt. We ought to add that this decision was based on the fact that the said Act at the relevant time did number companytain section 18A which came into force on May 15, 1951 and it was section 18A which was companystrued by this Court in Firm of Illuri Subbayya Chetty Sons 1964 1 SCR 752. In Basappas case 2 the taxpayer sought in an action for refund of tax paid, a decree on the plea that, the transactions in respect of which tax was levied were outside sales, and it was held that in the absence of express exclusion of the jurisdiction of the civil companyrt, the action for refund of tax was maintainable. But the nature of the transactions taxed in the Kamala Mills case 1 was number different. In the judgment in Kamala Mills case 1 it was pointed out that the jurisdiction of the civil companyrt to entertain a suit for refund of tax paid in companypliance with an order of assessment may be excluded either expressly or necessary implication, and as the scheme of the Bombay Sales Tax Act, 146, indicated that a companyplete machinery was set up by companystituting appropriate authorities under the Act, and creating a hierarchy of authorities to deal with the problem of levying tax as companytemplated by the Act, jurisdiction of the civil companyrt to entertain the suit was excluded by implication as well as by express enactment. That is clear from the following observations in the Kamala Mills case 1 Whether or number a return is companyrect whether or. number transactions which are number mentioned in the return, but about which the appropriate authority has knowledge, fall 1 1966 1 S.C.R. 64. 2 1964 5 S.C.R. 517. within the mischief of the charging section what is the true and real extent of the transactions which are assessable all these and other allied questions have to be determined by the appropriate authorities themselves and so, we find it impossible to accept Mr. Sastris argument that the finding of the appropriate authority that a particular transaction is taxable under the provisions of the Act, is a finding on a companylateral fact which gives the appropriate authority jurisdiction to take a further step and make the actual order of assessment. The action of the taxing authority in Basappas case 1 in taxing transactions which he erroneously held were taxable was number more outside the Act, than the action of the taxing authority in Kamala Mills case 2 . If it be granted that the jurisdiction of the civil companyrt may be excluded by express enactment or by necessary intendment arising from the scheme of the Act, Basappas case 1 must be regarded as wrongly decided. It is true that even if the jurisdiction of the civil companyrt is excluded, where the provisions of the statute have number been companyplied with or the statutory tribunal has number acted in companyformity with the fundamental principles of judicial procedure, the civil companyrts have jurisdiction to examine those cases Secretary of State for India v. Mask Company 2 . Counsel for the respondents urged that the case of the respondents fall within that exception, since the Sales-tax Officer in imposing tax-liability acted in defiance of the mandatory provisions of the Act and in support of the argument he placed reliance upon r. 7 of the Rules framed under the Act and the definition of turnover under the Act. Under the Act sales-tax is charged for the year at the prescribed rates on the total turnover of the dealer. The Government of Travancore-Cochin promulgated rules in exercise of powers under s. 24 of the Travancore- Cochin General Sales Tax Act, and r. 7 dealt with companyputation of net turnover. In r. 7 1 by cls. a to k certain exemptions admissible in the companyputation of the net turnover were set out. By numberification No. SRI-1643-51- RD dated March 31, 1951 it was directed that with effect from April 1, 1951, the following clause shall be added 1 all amounts of sales-tax companylected by the dealer. By this amendment in the companyputation of the taxable turnover, the amounts of sales tax companylected by the dealer were number to be included. But this amendment was to have effect only from April 1, 1951, and in the proceeding in this appeal tax-liability for the assessment period ending March 31, 1951 fell to be determined. 1 1964 5 S. C. R. 517. 2 1966 1 S. C. R. 64. L. R. 67 1. A. 222. The exemption was therefore inoperative in the companyputation of taxable turnover for the assessment year in question. Counsel for the. respondents however companytended that the effect of the amendment w s merely to clarify what was implicit in the companytent of the expression turnover. By s. 2 k turnover means-insofar as the definition is relevant the aggregate amount for which goods are either bought by or sold by a dealer, whether for cash or for deferred payment or other valuable companysideration Turnover being the aggregate amount for which goods are bought or sold, and numbermally the aggregate amount would include such amount as the purchaser pays to the dealer for the goods, the expression aggregate amount for which goods are . . . sold within the meaning of turnover in s. 2 k would include the amount of sales-tax received by the dealer. There is numberprovision in the Act which may by implication suggest that from the companynotation of the expression turnover the sales tax companylected in the year of assessment ending March 31, 1951 was to be excluded. Exclusion prescribed by cl. 1 of r. 7 1 enacted with effect from April 1, 1951 is number clarificatory, but prescribes an additional head in the companyputation of net turnover. This Court in George Oaks Private Ltd. v. State of Madras 1 in dealing with the question whether sales tax charged by the dealer may be excluded within the meaning of the expression turnover as used in the Madras General Sales-Tax Act, 1939, observed Under the definition of turnover the aggregate amount for which goods are bought or sold is taxable. This aggregate amount includes the tax as part of the price paid by the buyer. the amount goes into the companymon till of the dealer till he pays the tax. It is money which he keeps using for his business till he pays it over to Government. Indeed, he may, turn it over again and again till he finally hands it to Government. There is thus numberhing anamolous in the law treating it as part of the amount on which tax must be paid by him. This companyception of a turnover is number new. It is found in England and America and there is numberreason to think that when the legislatures in India defined turnover to include tax also, they were striking out into something quite unknown and unheard of before. Counsel for the respondents companytended that these observations made in interpreting the terms of the Madras General Sales tax Definition of Turnover and Validation of Assessments Act, 1954, have numberbearing on the interpretation of the expression turnover as in the Travancore-Cochin General Sales tax Act. But the 1 1962 2 S.C.R. 570 A.I.R. 1962 S. C. 1037. observations made by the Court were number made in the companytext of any special statute. There was in the Travancore-Cochin General Sales-tax Act at the material time numberexpress provision which obliged the taxing authority to exclude from the companyputation of taxable turnover the amount of sales-tax companylected by the dealer. The argument of companynsel for the respondents that the taxing authority has infringed a prohibition imposed upon him has therefore numbersubstance.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 661 of 1963. Appeal by special leave from the judgment and order dated August 17, 1959 of the Calcutta High Court in Civil Rule No. 274 of 1958. C. Chatterjee and Sukumar Ghose, for the appellant. Sarjoo Prasad and S. C. Mazumdar, 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 Calcutta in an application under s. 115 of the Code of Civil Procedure and under art. 227 of the Constitution filed by the tenant, Shri Surendra Nath Bibra, number appellant before us. Stephen Court Limited, respondent before us, hereinafter referred to as the plaintiff, filed a suit in the Court of Small Causes, Calcutta, for the recovery of rent from September 1956 to November,1956, at the rate of Rs. 350/- per mensem, and interest, against the appellant, hereinafter referred to as the defendant, alleging that the defendant was a monthly tenant by virtue of a lease dated April 30, 1956, under the plaintiff, in respect of flat No. 17 at promises No. 18A, Park Street, known as Stephen Court in the town of Calcutta, and that the defendant had number paid the rent from September to November, 1956. The defendant, inter alia, Pleaded that relying on the representation and assurance of the plaintiff that three bed-rooms, two bath rooms etc. would be available to the defendant in flat No. 17 he executed a lease on April 30, 1956, for a period of 21 years, but the plaintiff put him in possession only of two bed-rooms and number three, and according to him, in the circumstances he was entitled to suspend the rent altogether. The Small Cause Court Judge, Mr. Mandal, found that the defendant had number been put into possession of one of the three bed-rooms. Purporting to follow Katyayani Debi v. Udoy Kumar Das 1 and Abhoya Charan Sen v. Hem Chandra Pal 2 he held that the defendant was entitled to suspend payment- of rent to the plaintiff. The plaintiff then preferred an application under s. 38 of the Presidency Small Cause Courts Act against the dismissal of its suit. The Full Bench of the Small Causes Court, following Ram Lal Dutt Sarkar v. Dhirendra Nath.Roy, 3 held that the plaintiffs claim for arrears of rent must succeed in spite of the fact that the landlord had failed to give possession of one out of the three bed-rooms of the demised premises. The Bench, however, made it clear that the number- applicability of the principle of suspension of rent in the present suit for recovery of arrears of rent for a parti- cular period will number necessarily debar the tenant from claiming other appropriate reliefs against the failure of the landlord to put him In possession of the entire demised premises by way of apportionment of rent or damages. Accordingly, it decreed the suit. The defendant then filed an application under s. 115, Civil Procedure Code, and art. 227 of the Constitution. In the application the defendant prayed that the suit be dismissed. In the alternative, the defendant alleged that the plaintiff was at best entitled only to a proportionate rent. The High Court dismissed the application and the defendant having obtained special leave, the matter is number before us. Mr. N. C. Chatterjee, the learned companynsel for the defendant,. companytends that the decision in Ram Lal Dutts 4 case which the High Court and the Full Bench of the Small Causes Court had followed was distinguishable because in that case the tenancy was. an agricultural tenancy and the tenant in that case had raised the point after the lapse of a number of years. He says that the doctrine of suspension of rent should be applied to the facts of this case because the plaintiff had deliberately number given possession 1 30 C.W.N. P.C. 1 2 33 C.W.N. 715. 3 70 I.A. 18. of one bed-room. In the alternative he companytends that the Fun Bench of the Small Causes Court and the High Court should have made an order for apportionment of rent. We are unable to agree with Mr. Chatterjee that the decision of the Privy Council in Ram Lal Dutts 1 case can be distinguished on the ground urged by him. It is numberdoubt true that the Privy Council was companycerned with an agricultural tenancy but the Privy Council decided the appeal on a matter of principle, the principle being that the doctrine enunciated, in Neak v. Mackenzie 2 should number be regarded as a rule of justice, equity and good companyscience in India in all circumstances. It is interesting to numbere that the subject-matter of the lease in Neak v. Mackenzie 2 was a dwelling house and land attached to it, and it was eight acres of the land which was attached to the house that the tenant had been kept out ,of possession. Be that as it may, in our opinion, the doctrine laid down in Neale v. Mackengie 2 is too inflexible and cannot be applied to all cases. As observed by Sir George Rankin, the ,doctrine cannot be justified as a dependable rule to be adhered to numberwithstanding hard cases. On the one hand it does number seem ,equitable that when a tenant enjoys a substantial portion of the property of the landlord, leased to him, without much inconvenience, he should number pay any companypensation for the use of the property , in other words, to borrow the language of Sir George Ranking that he should enjoy a windfall. On the other hand it is unfair that if a tenant is number given possession of a substantial portion of the property, he should be asked to pay any companypensation for the use of the property while he is taking appropriate measures for specific performance of the companytract. It seems to us that it will depend on the circumstances of each case, whether a tenant would be entitled to suspend payment of the rent or whether he should be held liable to pay proportionate part of the rent. On the facts of this case we are of the opinion that the tenant is number entitled to suspend the payment of rent but he must pay a proportionate part of the rent. We may make it clear that like the Privy Council in Ram Lal Dutts 1 case we are number deciding that the doctrine of suspension ,of rent should or should number be applied at all to cases of eviction ,of the lessee by the lessor from a part of the land, and if so, whether it is limited to rents reserved as a lump sum, and whether it is a rigid or discretionary rule-these questions will call for careful review when they are presented by the facts of a particular case. In view of this we need number companysider cases like Hakim Sardar Bahadur v. Parkash Singh 3 Jatindra Kumar Seal v. Raimohan Bai 4 and Nilkantha Pati v. Kshitish Chandra Satati. 5 1 70 I.A. 18. 2 150 E.R. 635. A.I.R. 1962 Pun. 385. 4 A.I.R. 1961 An. 52. 5 1. L.R. 1952 1 Cal. 59. The High Court rejected the plea of apportionment of rent on the ground that the defendant had number taken a specific plea to this effect in the written statement. The second ground given by the High Court was that it would be unreasonable to thrust a relief on the defendant unless he himself chooses one or more of the alternative reliefs available to him. Further, numberprayer was 3 made before the High Court to amend the written statement to include this relief. In our opinion, the Full Bench of the Small Causes Court should have remanded the case for calculation of the proportionate rent for the portion of the premises taken possession of by the defendant. In our view, the High Court has taken too technical a view. It would be inequitable to allow the plaintiff to recover the full rent when he has number delivered possession of the whole of the premises in question. Mr. Sarjoo Prasad, the learned companynsel for the plaintiff, urges that the defendant had paid rent voluntarily for four months--this fact also is relied on by the High Court-and therefore we should number remand the case. But we find that three months rent was paid in advance as security deposit, and hence there is numberforce in the companytention. Mr. Sarjoo Prasad finally companytends that as this appeal arises from an application under s. 115 of Civil Procedure Code and art. 227 of the Constitution, we should number interfere with the decision of the Full Bench of the Small Causes Court even though it be erroneous. A similar point was raised before the High Court and although the High Court found some substance in the point it chose to go into the merits of the case and number dismiss the application on this ground. It must be remembered that the application was also under art. 227 of the Constitution, and although ordinarily art. 227 should be used sparingly, on the facts of this case we are satisfied that the High Court was right in number throwing out the application on this ground. In the result the appeal succeeds. We set aside the orders of the- High Court and of the Full Bench of the Small Causes Court and of the Judge Small Causes Court, and remand the case to the Court of Small Causes, Calcutta, with the direction that it will dispose of the suit in the light of this judgment. The parties would be at liberty to lead evidence before the Court of Small Causes on the question of apportionment of rent.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 323 of 1963. Appeal by special leave from the judgment and order dated October 20, 1961 of the Rajasthan High Court in D. B. Civil Writ No. 41 of 1959. C. Misra and M. V. Goswami, for the appellant. C. Agarwal, for respondent No. 1. N. Sachthey, for respondents Nos. 4 and 5. The judgment of the Court was delivered by Gajendragadkar, C. J. The appellant Prabhu is the owner of agricultural land bearing Khasra Nos. 224, 215, 244, 299, 320, 506, 617 and 687 situated in village Nilakpur, Tehsil Behror, District Alwar, in the State of Rajasthan. The appellants father Jora had executed a usufructuary mortgage of the said land in about 1936 for a period of twenty years in favour of one Ganga Din. After the expiry of the period prescribed by the said mortgage, the appellant obtained a decree for redemption on July 16, 1956. This decree declared that the mortgage and all encumbrances created by the mortgagee or any person claiming under him were extinguished and directed the mortgagee to deliver possession of the mortgaged property to the appellant. It appears that during the companytinuance of the mortgage, the mortgagee Ganga Din had let out the aforesaid land to respondents I to 3 Ramdey, Yadram and Nathu respectively. Meanwhile, on October 15,1955 the Rajasthan Tenancy Act, 1955 No. 3 of 1955 hereinafter called the Act had companye into force. On July 28, 1956, the appellant instituted the present suit for possession of the land in question against the three respondents. This suit was tried by the Sub- Divisional Officer, Behror. In this suit the appellant had alleged that after the redemption decree had been passed in favour of the appellant, the respondents had in fact delivered possession of the property to the appellant, but a few days thereafter they had trespassed into the property and obtained its possession wrongfully. This plea was resisted by the respondents on the ground that they had number surrendered possession of the property to the appellant as alleged by him and that under the relevant provisions of the Act they were entitled to remain in possession of this property. On these pleadings the learned Sub-Divisional Officer framed two issues. They were No. 1. Whether the respondents are trespassers in respect of the fields and are liable for ejectment and No. 2. to what relief, if any, the appellant is entitled to He found that the ,respondents were number trespassers as alleged by the appellant and as such the appellant was number entitled to any relief. In the result, the appellants suit was dismissed. Against this decision the appellant preferred an appeal before the Additional Commissioner, Ajmer. The appellate authority reversed the finding of the trial companyrt and held that the appellant was entitled to eject the respondents. The respondents challenged the companyrectness of this order by preferring a second appeal before the Board of Revenue for Rajasthan, Ajmer. Their appeal succeeded and in companysequence, the order passed by the appellate authority was set aside and that passed by the trial judge was restored. The Board has held that by virtue of the provisions of s. 15 of the Act, the possession of the respondents was unassailable and they companyld be ejected only in accordance with the relevant section of the said Act. Since numbere of the grounds available to the appellant under the Act had been proved, he was number entitled to a claim for ejectment. The validity of the Boards decision was challenged by the appellant by moving the Rajasthan High Court in its writ jurisdiction under Art. 226 of the Constitution. It was urged by the appellant before the High Court that the order passed by the Board was plainly erroneous in law and as such should be set aside. This petition, however, failed and was dismissed by the High Court. It is against this decision that the appellant has companye to this Court by special leave. The relevant facts, in the fight of which the question of law raised before us by Mr. Misra on behalf of the appellant has to be companysidered, are numberlonger in dispute. The appellants father created a usufructuary mortgage of the land and during the companytinuance of the said mortgage the respondents were admitted as tenants. The mortgage was eventually redeemed and in spite of the redemption decree the respondents companytinued in possession of the land. On these facts the question which arises for our decision is whether the respondents, who have been inducted into the land as tenants by the usufructuary mortgagee, can be ejected by the appellant on the ground that the mortgage in question has been redeemed. The answer to this question depends upon the effect of s. 15 of the Act. Before dealing with the specific provisions of the said section we may refer to two definitions which are relevant. Tenant has been defined by s. 5 43 of the Act as meaning a person by whom rent is or but for a companytract, express or implied, would be payable and except when the companytrary intention appears, shall include a companyenant or a grove- holder or a village servant or a tenant of khudkasht or a mortgagee of tenancy rights but shall number include a grantee at a favourable rate of rent or an ijaredar or a the kadar or a trespasser. That is how the definition stood at the relevant time. The test prescribed by this definition is that the person can claim to be a tenant if it is shown that rent is payable by him in respect of the land. That test is clearly satisfied by the three respondents in the present case. The next definition to which it is necessary to refer is that of a trespasser. The appellant, in his present suit, has companytended that the respondents are trespassers. A trespasser has been defined by S. 5 44 of the Act as meaning a person who takes or retains possession of unoccupied land without authority or who prevents another person from occupying land duly let out to him. That is how the definition read at the material time. It is plain that the respondents do number fall within the definition of trespasser as prescribed by this clause. Let us number refer to s. 15 as it stood at the relevant time. Section 15 provides, inter alia, that subject to the provisions of s.16 every person who, at the companymencement of this Act, is a tenant of land, shall, subject to the provisions of this Act and subject further to any companytract number companytrary to s. 4 be entitled to all the right companyferred and be subject to all the liabilities imposed on Khatedar tenants under the Act. In other words, as soon as s. 1.5 came into operation on October 15, 1955, the possession of the respondents, who had been inducted into the land by the mortgagee was substantially altered and they became Khatedars by virtue of the statutory provisions prescribed by s. 1 5. Section 161 of the Act provides that numbertenant shall be ejected from his holding otherwise than in accordance with the provisions of this Act. The position thus is clear that as soon as the Act came into force the respondents were entitled to the benefits of s. 1 5 and cannot be ejected except under the provisions of the Act in view of s. 161. It is because of these provisions that the appellant was driven to make the plea that the respondents were trespassers inasmuch as they had voluntarily surrendered possession of the land to him after the redemption decree was passed and had wrongfully entered into possession thereafter. That plea has number been proved and the matter falls to be companysidered squarely within, the provisions of ss.15 and 161 of the Act. It is true that s. 183. of the Act provides for the ejectment of a trespasser but that section has numberapplication to this case inasmuch as the respondents cannot be held to be trespassers at all. Mr. Misra, however, companytends that there are two decisions of this Court which support his case that tenants introduced by the mort-gagee during the companytinuance of the mortgage can have numberclaim to remain in possession of the land after the mortgage itself has been redeemed and he argues that the said principle would justify the appellants claim for ejecting the respondents in the present case. In Mahabir Gope and Others v. Harbans Narain Singh and Others 1 , this Court has held that as a general rule a person cannot, by transfer or otherwise, companyfer a better title on another than he himself had. A mortgagee cannot, therefore, create an interest in the mortgaged property which will enure beyond the termination of his interest as mortgagee. In companysequence any lease granted by a morgagee in possession must companye to an end at redemption. A mortgagee, cannot, during the subsistence of the mortgage, act in a manner detrimental to the mortgagors interests such as by giving a lease which may enable the tenant to acquire permanent or occupancy rights in the fields thereby defeating the mortgagors right to khas possession such an act would fall within the provisions of s. 76, subclause e of the Transfer of Property Act. It is on these observations that Mr. Misra founds his argument. 1 11952 S.C.R. 775 A.I.R. 1952 S.C. 205. It must be remembered that these observations were made by reference to the numbermal relationship between the mortgagor and the mortgagee and their respective rights and obligations as determined by relevant provisions of the Transfer of Property Act. Having made these observations, however, this Court has taken the precaution to point out that even in regard to tenants inducted into the land by a mortgagee cases may arise where the said tenants may acquire rights of special character by virtue of statutory provisions which may, in the meanwhile, companye into operation. A permissible settlement by a mortgagee in possession with a tenant in the companyrse of prudent management and the springing up of rights in the tenant companyerred or readed by statute based on the nature of the land and possession for the requisite period, its observed, was a different matter al- together. Such a case is clearly an exception to the general rule prescribed by the Transfer of Property Act. It will thus be seen that while dealing with the numbermal position under the Transfer of Property Act, this Court specifically pointed out that the rights of the tenants inducted by the mortgagee may companyceivably be improved by virtue of statutory provisions which may meanwhile companye into operation. That is precisely what has happened in the present case. During the companytinuance of the mortgage S. 15 of the Act came into operation and that made the respondents Khatedars who are entitled to claim the benefit of s. 161 of the Act. The other decision on which Mr. Misra relies is Harihar Prasad Singh Another v. Must. of Munshi Nath Prasad Others. 1 In that case it was held that the persons inducted by mortgagees companyld be raiyats within the meaning of s. 5 3 of the Bihar Tenancy Act so as to acquire any rights of occupancy under S. 21 of the said Act. This companyclusion, however, flows from the basic fact that the mortgagees who inducted the tenants into the land were neither proprietors number tenure holders as defined by the said Act. Section 5 3 of the said Act provides that a person shall number be deemed to be a raiyat unless he holds land either immediately under a proprietor or immediately under a tenure-holder and so, when tenants claimed the status of a raiyat, in that case it became necessary to companysider whether they held the land under a proprietor or under a tenureholder, and since it was clear that the mortgagees were neither proprietors number tenure-holders, the tenants inducted by them companyld number claim the benefit of S. 5 3 . It would thus be seen that this decision turns inevitably upon the relevant provisions of the Bihar Act and the said provisions show that numberstatutory benefit had been companyferred on the tenants as claimed by them under S. 5 3 of the said Act. This decision therefore does number lay down any general proposition on which Mr. Misra can possibly rely. 1 1956 S.C.,R. 1 In the result, the view taken by the Board about the status of the respondents is right and the High Court was, therefore, justified in dismissing the appellants writ petition filed before it. The appeal therefore fails and is dismissed with companyts. Costs in favour of respondent No.

Case appeal was rejected by the Supreme Court

CRIMINALAPPELLATE JURISDICTION Criminal Appeal No. 157 of 1964. Appeal by special leave from the judgment and order dated March 20, 1964 of the Allahabad High Court Lucknow Bench at Lucknow in Criminal Appeal No. 20 of 1962. Jai Gopal Sethi, C. L. Sareen and R. L. Kohli, for the appe- llant. T. Desai, R. L. Mehta and 0. P. Rana, for the respondent. The Judgment of the Court was delivered by Ramaswami, J. The appellant was tried for offences under s. 161, Indian Penal Code and s. 5 2 read with s. 5 1 d of the Prevention of Corruption Act by special Judge, Anti- Corruption, Lucknow who by his judgment dated January 8, 1962 companyvicted the appellant and sentenced him to three years rigorous imprisonment and a fine of Rs. 2,000. In default for payment of fine the appellant was further ordered to undergo rigorous imprisonment for one year. The appellant preferred an appeal to the Allahabad High Court, Lucknow Bench, which dismissed the appeal by its judgment dated March 20, 1964 and affirmed the companyviction and sentence imposed by the Special Judge upon the appellant. This appeal is brought, by special leave, from the judgment of the Allahabad High Court, Lucknow Bench. The appellant was employed as Assistant Director Enforce- ment, Government of India, Ministry of Commerce at Kanpur and used to deal with matters regarding the cancellation of licences of cloth dealers at Kanpur. On or about September 5, 1951 the appellant received a companyfidential letter dated August 30, 1951 from the District Magistrate, Kanpur. On the same date the appellant called one Ram Lal Kapoor who was the legal adviser of New Victoria Mills Ltd. at his house. The appellant showed him the letter of the District Magistrate and on the strength of that letter he demanded through Ram Lal Kapoor a bribe of Rs. 30,000 from Sidh Gopal for saving his licence from being cancelled. It appears that Sidh Gopal was a partner of various firms dealing in cloth and it was suspected that these firms were indulging in black-marketing in cloth. Sidh Gopal came to the appellant on September 9, 1951 to talk over the matter and the appellant made the same demand of bribe from him. On September 11, 1951, the appellant is alleged to have agreed with Ram Lal Kapoor to receive a sum of Rs. 10,000 as first instalment of the bribe from Sidh Gopal through Ram Lal Kapoor. Accordingly on September 11, 1951 at about 8 p.m. the appellant went to the house of Ram Lal Kapoor and accepted the bribe of Rs. 10,000 in currency numberes and also a Than of long cloth from the said Ram Lal Kapoor undertaking that in lieu thereof the appellant would number report against Sidh Gopal and thereby save his licence from cancellation. A raid had been prearranged and the raiding party companysisting of Shri Satish Chander P.W. I and Shri Onkar Singh P.W. 2, the District Magistrate and the Senior Superintendent of Police respectively were lying in wait at the premises of Ram Lal Kapoor. At about 9. 45 p.m. the appellant came out of the bungalow of Ram Lal Kapoor and on the agreed signal being given, the raiding party came and on search of the appellant an amount of Rs. 10,000 was found from his person. At the time of the recovery of the money the appellant made a statement that the amount received by him was as a loan as he wanted to purchase a bungalow. The defence of the appellant was that he never negotiated with Ram Lal Kapoor or Sidh Gopal regarding the bribe but the appellant had been falsely implicated because he had prosecuted one Bhola Nath of the firm of M s Mannulal Sidh Gopal under s. 7 of Essential Supplies Act and the District Magistrate had arrested Bhola Nath and kept him under detention under the powers companyferred by the Preventive Detention Act. In order to take revenge for the arrest of Bhola Nath, Sidh Gopal and Ram Lal Kapoor had companyspired together and falsely implicated the appellant. The Special Judge disbelieved the case of the appellant and held that the prosecution evidence sufficiently established the charges under S. 161, Indian Penal Code and S. 5 2 read with s. 5 1 d of the Prevention of Corruption Act. The findings of the trial companyrt have been affirmed by the Allahabad High Court in appeal which also rejected the case of the appellant as untrue and held that the amount of Rs. 10,000 was received by the appellant from Ram Lal Kapoor by way of illegal gratification and number as a loan for purchasing a house. The first question for determination is whether a presumption under sub-s. 1 of S. 4 of the Prevention of Corruption Act arises Where in any trial of an offence punishable under S. 161 or S. 165 of the Indian Penal Code it is proved that an accused person has accepted or obtained, or has agreed to accept or attempted or obtain, for himself or for any other person, any gratification other than legal remuneration or any valuable thing from any person, it shall be presumed unless the companytrary is proved that he accepted or obtained, or agreed to accept or attempted to obtain, that gratification or that valuable thing, as the case may be, as a motive or reward such as is mentioned in the said S. 161, or as the case may be, without companysideration or for a companysideration which he knows to be inadequate. It was held by this Court in Dhanvantrai Balwantrai Desai v. State of Maharashtra 1 that in order to raise the presumption under this sub-section what the prosecution has to prove is that the accused person has received gratification other than legal remuneration and when it is shown that he has received a certain sum of money which was number a legal remuneration, then the companydition prescribed by this section is satisfied and the presumption thereunder must be raised. It was companytended in that case that the mere receipt of any money did number justify the raising of the presumption and that A.I.R. 1964 S.C. 575. something more than the mere receipt of the money had to be proved. The argument was rejected by this Court and it was held that the mere receipt of the money was sufficient to raise a presumption under the sub-section. A similar argument was addressed in C. I. Emden v. State of Uttar Pradesh 1 . In rejecting that argument this Court observed If the word gratification is companystrued to mean money paid by way of a bribe then it would be futile or superfluous to prescribe for the raising of the presumption. Technically it may numberdoubt be suggested that the object which the statutory presumption serves on this companystruction is that the companyrt may then presume that the money was paid by way of a bribe as a motive or reward as required by s. 161 of the Code. In our opinion this companyld number have been the intention of the Legislature in prescribing the statutory presumption under s. 4 1 . This Court proceeded to state It cannot be suggested that the relevant clause in s. 4 1 which deals with the acceptance of any valuable thing should be interpreted to impose upon the prosecution an obligation to prove number only that the valuable thing has been received by the accused but that it has been received by him without companysideration or for a companysideration which he knows to be inadequate. The plain meaning of this clause undoubtedly requires the presumption to be raised whenever it is shown that the valuable thing has been received by the accused without anything more. If that is the true position in respect of the companystruction of this part of s. 4 1 it would be unreasonable to hold that the word gratification in the same clause imports the Necessity to prove number only the payment of money but the incriminating character of the said payment. It is true that the Legislature might have used the word money or companysideration as has been done by the relevant section of the English statute It must, therefore, be held that, in the circumstances of the present case, the requirements of sub-s. 1 of S. 4 have been fulfilled and the presumption thereunder must be raised. The next question arising in this case is as to what is the burden of proof placed upon the accused person against whom the presumption is drawn under S. 4 1 of the Prevention of Corruption Act. It is well-established that where the burden of an issue lies upon the accused, he is number required to discharge that burden by leading evidence to prove his case beyond a reasonable doubt. That is, A.I.R. 1960 S.C. 548. of companyrse, the test prescribed in deciding whether the prosecution has discharged its onus to prove the guilt of the accused but the same test cannot be applied to an accused person who seeks to discharge the burden placed upon him under s. 4 1 of the Prevention of Corruption Act. It is sufficient if the accused person succeeds in proving a preponderance of probability in favour of his case. It is number necessary for the accused person to prove his case beyond a reasonable doubt or in default to incur a verdict of guilty. The onus of proof lying upon the accused person is to prove his case by a preponderance of probability. As soon as he succeeds in doing so, the burden is shifted to the prosecution which still has to discharge its original onus that never shifts i.e., that of establishing on the whole case the guilt of the accused beyond a reasonable doubt. It was observed by Viscount Sankey in Woolmington v. Director of Public Prosecutions 1 that numbermatter what the charge or where the trial, the principle that the prosecution must prove the guilt of the prisoner is part of the companymon law of England and numberattempt to whittle it down can be entertained. This principle is a fundamental part of the English Common Law and the same position prevails in the Criminal Law of India. That does number mean that if the statute places the burden of proof on an accused person, he is number required to establish his plea but the degree and character of proof which the. accused is expected to furnish in support of his plea, cannot be equated with the degree and character of proof expected from the prosecution which is required to prove its case. In Rex v. Carr-Briant 2 a somewhat similar question arose before the English Court of Appeal. In that case, the appellant was charged with the offence of companyruptly making a gift or loan to a person in the employ of the War Department as an inducement to show, or as a reward for showing, favour to him. The charge was laid under the Prevention of Corruption Act, 1916, and in respect of such a charge, s. 2 of the Prevention of Corruption Act, 1916, had provided that a companysideration shall be deemed to be given companyruptly unless the companytrary is proved. The question which arose before the Court. was what is the accused required to prove if he wants to claim the benefit of the exception? At the trial, the Judge had directed the jury that the onus of proving his innocence lay on the accused and that the burden of proof resting on him to negative companyruption was as heavy as that ordinarily resting on the prosecution. The Court of Criminal Appeal held that this direction did number companyrectly represent the true position in law. It was held by the Court of Appeal that where, either by statute or at Common Law, some matter is resumed against an accused person unless the companytrary is proved, the jury should be directed that the burden of proof on the accused is less than that required at the hands of the prosecution in proving the case beyond a reasonable doubt, and that this burden may be discharged by evidence satisfying the jury of the 1 1935A.C. 462. 2 1943 1 K.B. 607. probability of that which the accused is called on to establish. The ratio of this case was referred to with approval by this Court in Harbhajan Singh v. The State of Punjab. 1 We are accordingly of the opinion that the burden of proof lying upon the accused under s. 4 1 of the Prevention of Corruption Act will be satisfied if the accused person establishes his case by a preponderance of probability and it is number necessary that he should establish his case by the test of proof beyond a reasonable doubt. In other words, the onus on an accused person may well be companypared to the onus on a party in civil proceedings, and just as in civil proceedings the companyrt trying an issue makes its decision by adopting the test of probabilities, so must a criminal companyrt hold that the plea made by the accused is proved if a preponderance of probability is established by the evidence led by him. It is against this background of principle that we must proceed to examine the companytention of the appellant that the charges under s. 161, Indian Penal Code and s. 5 2 read with s. 5 1 d of the Prevention of Corruption Act have number been proved against him. It was argued by Mr. Sethi that the circumstances found by the High Court in their totality do number establish that the appellant accepted the amount of Rs. 10,000 as illegal gratification and number as a loan. It was also argued -for the appellant that he had adduced sufficient evidence to show that the amount was really given to him as a loan by Ram Lal Kapoor. Having examined the findings of both the lower companyrts, we are satisfied that the appellant has number proved his case by the test of preponderance of probability and the lower companyrts rightly reached the companyclusion that the amount was taken by the appellant number as a loan but as illegal gratification. It has been found by the High Court that Ram. Lal Kapoor was number likely to lend a sum of Rs. 10,000 to the appellant without getting a formal document executed. It is number suggested by the appellant that he executed a hand-note in favour of Ram Lal Kapoor. There was a suggestion that he granted a receipt for Rs. 10,000 to Ram Lal Kapoor but the High Court rejected the case of the appellant on this point. The High Court has observed that, in the first instance, the appellant did number make a statement with regard to the receipt as soon as the amount was recovered from him. It was only after he was taken to Marden Singhs place that he made a belated statement that the amount was advanced to him by Ram Lal Kapoor as a loan and he had granted a receipt. Mr. Sethi companytended that it was the duty of the District Magistrate and the Senior Superintendent of Police to have made a search of the whole bungalow of Ram Lal Kapoor for the alleged receipt and the failure of these two officers to make the search should be taken to prove the appellants case regarding the grant of the alleged receipt. 1 1965 3 S.C.R. 235. We do number accept the submission of the learned companynsel as companyrect. The High Court has remarked that the statement of the appellant was highly belated and the District authorities were justified in number making a search and ransacking the whole bungalow of Ram La Kapoor for the recovery of the alleged receipt. It was then companytended on behalf of the appellant that numberpanchanama was prepared by the District Magistrate or the Senior Superintendent of Police who recovered the money from the appellant. It was also stated that numberindependent witness was summoned to be present at the time of the search. It was pointed out that the District Magistrate is related to Sidh Gopal and it was suggested by Mr. Sethi that the evidence of the District Magistrate, of the Senior Superintendent of Police and of Sidh Gopal should number have been accepted by the High Court as true. But all the circumstances have been taken into account by the High Court in discussing the testimony of these witnesses and ordinarily it is number permissible for the appellant to reopen companyclusions of fact in this Court, especially when both the lower Courts have agreed with those companyclusions which relate to the credibility of witnesses who have been believed by the trial Court which had the advantage of seeing them and hearing their evidence. It was then companytended by the appellant that the High Court has taken into account the statement of Ram Lal Kapoor made in a departmental proceeding in companying to a companyclusion regarding the guilt of the appellant. We do number think there is any justification for this argument. The High Court has properly held that the evidence of Ram Lal Kapoor dated December 16, 1952-Ex. P-11-was number admissible and has excluded it from its companysideration in discussing the guilt of the appellant. It is true that in setting out the history of the case the High Court has referred to the statement of Ram Lal Kapoor but that does number mean that the High Court has used the statement of Ram Lal Kapoor for the purpose of companyvicting the appellant in the present case. It was also companytended by Mr. Sethi on behalf of the appellant that the statements-Exs. P-3 an P.4-should have been excluded from companysideration. It was companytended that these statements were made by the appellant to the District Magistrate after the recovery of the money and were bit by the provisions of s. 162 of the Criminal Procedure Code. On behalf of the respondent Mr. Desai said that these statements are admissible because they were made to the District Magistrate and number to a police officer and were number during the companyrse of investigation because the First Information Report was lodged on September 13, 1951 at 8 - 30 p.m. long after the statements were made. We do number companysider it necessary to express any companycluded opinion as to whether Exs. P-3 and P-4 are admissible but even if they are excluded from companysideration there is sufficient evidence to support the companyviction of the appellant on the charges under s. 161, Indian Penal Code and s. 5 2 read with s. 5 1 d of the Prevention of Corruption Act. It was also submitted by Mr. Sethi that the evidence of Sidh Gopal should number have been accepted by the High Court. It was pointed out that the appellant had received the letter of District Magistrate-Ex. P-1 on September 5, 1951 and it was, therefore, number likely that the appellant should have companytacted Ram Lal Kapoor and Sidh Gopal on the 18th or 19th August, 1951. There is, however, evidence in this case that Bhola Nath who was a Salesman of M s Mannulal Sidh Gopal was arrested in August, 1951 on the report of the appellant and Sidh Gopal apprehended that he would also companye under the clutches of the law and his licences may also possibly be cancelled. In any event, this is a question regarding the credibility of Sidh Gopal and it is number open to the appellant to companytest the finding of the lower companyrts with regard to the credibility of that witness in this appeal. Lastly, Mr. Sethi submitted that the appellant was 66 years old and the offence was companymitted in 1951 and legal proceedings have protracted for 15 years. Mr. Sethi, therefore, prayed that the sentence imposed on the appellant may. be reduced. We are unable to accept this argument. We do number companysider that the sentence is excessive in the circumstances of the case.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 836 of 1963. Appeal by special leave from the judgment and decree dated January 4. 1962 of the Orissa High Court in S.A. No. 90 of 1960. Gopalakrishnan, for the appellants. Parthasarathy, S. N. Prasad, J. B. Dadachanji, O. C. Mathur and Ravinder Narain, for respondent No. 1. The Judgment of the Court was delivered by Wanchoo, J This is an appeal by special leave against the judgment of the Orissa High Court. The brief facts necessary for present purposes are these. A suit was brought by eleven plaintiffs who are appellants before us including Dolai Molliko for a declaration that the plaintiffs were tenants with occupancy rights in the lands in dispute. The suit was resisted by the defendants who are number respondents. The Munsif dismissed the suit. Thereupon there was an appeal by the plaintiffs. During the pendency of that appeal, Dolai Molliko, appellant, died in March 1958. An application was made within time for bringing on record his heirs, and these heirs were two, namely, the widow and a major son of the deceased. No objection was made to this application and companysequently the widow and the son of the. deceased were substituted on record as heirs. The Subordinate Judge allowed the appeal and decreed the suit and gave the declaration prayed for by the plaintiffs. Then followed a second appeal to the High Court by the defendants-respondents. When the appeal was pending in the High Court, it was discovered that Dolai had left three other heirs, namely, a minor son, a married daughter and an unmarried daughter besides the widow and the major son who had been brought on record as his heirs. Consequently an objection was raised in the High Court on behalf of the present respondents that as all the heirs of the deceased Dolai had number been brought on record, the appeal before the Subordinate Judge had abated in toto. The High Court accepted this companytention and held that as three heirs had been left out and as there companyld be numberquestion of want of knowledge of the existence of these heirs on the part of the widow and the major son who had applied for being brought on record, the appeal abated, as it was number disputed that in the present case the appeal would abate in toto. In companyse- quence the appeal before the High Court was allowed holding that the appeal before the Subordinate Judge had abated and the judgment of the Munsif dismissing the suit was restored. Thereupon the appellants obtained special leave from this Court and that is how the matter has companye before us. The only question therefore which falls for companysideration is whether the estate of Dolai deceased appellant was sufficiently represented before the Subordinate Judge by the widow and the major son. The question whether in similar circumstances an appeal abates came up for companysideration before this Court in Daya Ram v. Shyam Sundari 1 . In that case it was held that where a plaintiff or an appellant after diligent and bona fide enquiry ascertains who the legal representatives of a deceased defendant or respondent are and brings them on record within the time limited by law, there is numberabatement of the suit or appeal, the impleaded legal representatives sufficiently represent the estate of the deceased and a decision obtained with them on record will bind number merely those impleaded but the entire estate including those number brought 1 1965 1 S.C.R. 231. L/84SCI-4 on record. In a case where the person brought on record is a legal representative it would be companysonant with justice and principle that in the absence of fraud or companylusion the bringing on record of such a legal representative is sufficient to prevent the suit or the appeal from abating. The matter was again companysidered by this Court in N. K. Mohd. Sulaiman Sahib v. N. C. Mohd. Ismail Saheb 1 . That was a mortgage suit, though the facts were slightly different from Daya Rams case 1 . In Daya Rams case 2 , the sole respondent had died and an application was made in time for bringing his heirs on the record but two heirs were left out in this application. The remaining heirs were brought on record and a preliminary objection was raised that as all the heirs had number been brought on record, the appeal had abated, and it was this objection which this Court rejected in Daya Rams case 1 . In Mohd. Sulaimans case 1 , how- ever, the mortgagor had died before the suit was brought by the mortgagee against some of the heirs of the mortgagor but he left out two minor sons. The question then arose whether the two minor sons who had been left out from the array of defendants would also be bound by the decree passed in that suit. This Court followed the judgment in Daya Rams case 1 and it was held that if the plaintiff had proceeded bona fide and after due enquiry and under a belief that the persons who were sued were the only legal representatives, the whole estate would be bound including those heirs who were number arrayed as defendants. This Court further pointed out that this rule will of companyrse number apply to cases where there has been fraud or companylusion between the creditor and the heir impleaded or where there are other circumstances which indicate that there has number been a fair or real trial, or that the absent heir had a special defence which was number and companyld number be tried in the earlier proceedings. It has been companytended on behalf of the appellants that the principle of these cases applies to the present case and the fact that three of the heirs were left out would make numberdifference as the entire estate of Dolai, deceased, must be held to be represented by the widow and the major son who were brought on the record. It will be numbericed that there is one difference between the present case and the two cases on which reliance has been placed on behalf of the appellants. This is number a case where a plaintiff or an appellant applies for bringing the heirs of the deceased defendant or respondent on the record this is a case where one of the appellants died and his heirs have to be brought on record. In such a case there is numberquestion of any diligent or bona fide enquiry for the deceased appellants heirs must be known to the heirs who applied for being brought on the record. Even so we are of opinion that unless there is fraud or companylusion or there are other circumstances which indicate that there has number been a fair or real trial or that against the absent heir there was a special case which was number and companyld number 1 1966 1 S.C.R. 937. 2 1965 1 S.C.R. 231. be tried in the proceeding, there is numberreason why the heirs who have applied for being brought on record should number be held to represent the entire estate including the interests of the heirs number brought on the record. This is number to say that where heirs of an appellant are to be brought on record all of them should number be brought on record and any of them should be deliberately left out. But if by oversight or on account of some doubt as to who are the heirs, any heir of a deceased appellant is left out that in itself would be numberreason for holding that the entire estate of the deceased is number represented unless circumstances like fraud or companylusion to which we have referred above exist. In the present case there is numberquestion of any fraud or companylusion number is there anything to show that there had number been a fair or real trial, number can it be said that against the absent heir there was a special case which was number and companyld number be tried in the proceeding in his absence. It may also be numbericed that the respondents themselves did number object in the companyrt of the Subordinate Judge that some of the heirs of deceased Dolai had been left out and the case proceeded there, as if the estate of Dolai deceased was represented in full by the heirs brought on record. It was only in the High Court that it was discovered that Dolai had left three other heirs who had number been brought on the record. In the circumstances we are of opinion that the estate of Dolai was fully represented by the heirs who had been brought on the record in the Subordinate Judges companyrt and that these heirs represented the absent heirs also who would be equally bound by the result, and there is numberreason to hold that the appeal before the Subordinate Judge had abated on that ground. We may in this companynection refer to certain cases where a similar view has been taken. In Abdul Rahman v. Shahab-ud- Din 1 , the appellant had died and only his sons were brought on the record and number his widow and daughters, though the appellant was a Mohanimadan. It was held that as the heirs who had applied for being brought on record as heirs and legal representatives of the deceased appellant bona fide believed that they were the sole heirs and legal representatives of the deceased, the appeal did number abate numberwithstanding that in Mohammadan law other persons would be companyheirs of the deceased. In Mohd. Zafaryab Khan v. Abdul Razaq 2 , it was held that when by an order which has become final, a certain persons name has been brought on to the record of an appeal as the legal representative of the deceased appellant, it is number open to the respondent to urge that the appeal has abated because some other heirs have been left out. In Ram Charan v. Bansidhar 3 , the sole appellant had died leaving two daughters. One of his daughters was brought on record I.L.R. 1920 1 Lah. 481. 2 I.L.R. 1928 1 All. 857. L/85SCI-4 a 3 I.L.R. 1942 AD. 671. as his legal representative but number the other. It was held that the substitution of one of the daughters as legal representative of the deceased must be deemed to have been for the benefit of the entire inheritance which came into being on his death, and the entire estate, was represented by her and there was numberabatement of any part of it. In Babuie Shanti Devi v. Khodai Prasad Singh 1 , on the death of the plaintiff in a suit to enforce a mortgage his sons were brought on record but number his widow who had herself filed a petition stating that she was number in possession of the properties of the deceased plaintiff number did she desire any interest in the family properties, it was held that the failure to bring the widow on the record was a mere technical defect and the suit did number abate.

Case appeal was accepted by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Appeal No. 209 of 1964. Appeal by special leave from the Judgment and order dated January 31, 1964 of the Bombay High Court in Criminal Revision Application No. 913 of 1963. C. Dalal, E. E. Jhirad and O. P. Rana, for the appellant. C. Patwardhan B. Dutta, J. B. Dadachanjl, O. C. Mathur and Ravinder Narain, for respondent No. 1. The Judgment of the Court was delivered by Shah, J. The appellant, Mrs. Menezes, is the owner of a house in Bombay, and the wife of the first respondent Yusuf Khan is a tenant of a part of the first floor in that house. On January 17, 1963 one Robert-a servant of the appellant, called the wife of the first respondent a thief and Halkat. On the next day the first respondent slapped the face of Robert. This was followed by a heated exchange of abusive words between the first respondent and the appellants husband. The first respondent was annoyed and threw at the appellants husband a file of papers. The file did number hit the appellants husband, but it hit the elbow of the appellant causing a scratch. The appellant lodged information at the Bandra police station companyplaining that the first respondent had companymitted house trespass in order to the companymitting of an offence punishable with imprisonment, had thrown a shoe at her, had slapped the face of her servant Robert, and had also caused her a bleeding incised wound on the forearm. The version of the appellant was a gross exaggeration of the incident. The Officer in charge of the police station was persuaded to enter upon an investigation on this information, which by charging the respondent with the offence of trespass was made to appear as if a companynizable offence was companymitted. The Sub-Inspector found that the appellant had suffered a mere scratch on her elbow. The appellant and Robert declined to go to a public hospital for examination or treatment, and were, it is claimed, examined by a private medical practitioner, who certified that the appellant bad suffered a bleeding incised wound, skin deep, size 1 in length on the right forearm, and that Robert had a swelling about 1 1/2 in diameter, roundish, soft and tender, but numberbruises. The offence was petty, but was given undue importance. The case was transferred from the Court of the Presidency Magistrate, Bandra, to the Court of the Presidency Magistrate VI Court, Mazagaon, Bombay, and was entrusted to a special prosecutor on behalf of the State. The Trial Magistrate held that the story that the first respondent had trespassed into the house of the appellant was false and the charge of trespass was made only with a view to persuade the police officer to investigate it as a companynizable offence. The story of the appellant that the first respondent had hurled a shoe at her was also disbelieved. The Trial Magistrate held that simple injuries were caused to Robert and to the appellant and for causing those injuries he companyvicted the first respondent of the offence under S. 323 P. Code and sentenced him to pay a fine of Rs. 10 on each of the two companynts. Against the order of companyviction, a revisional application was preferred to the High Court of Judicature at Bombay. The appellant was numberlonger companycerned with the proceedings in the High Court, but since there were some negotiations for companypounding the offence, the appellant was impleaded as a party to the proceeding before the High Court. The High Court was of the view that the appellant had grossly exaggerated her story, that the evidence of the medical practitioner who claimed to have examined the appellant and Robert and to have certified the injuries did number inspire companyfidence, that the husband of the appellant had addressed provocative and insulting abuses, and that in a state of excitement the respondent hurled a file of papers at the appellants husband which missed him and caused a scratch on the appellants forearm. The injuries caused to the appellant and to Robert were in the view of the High Court trivial and the case was one in which the injury intended to be caused was so slight that a person of ordinary sense and temper would number companyplain of the harm caused thereby. The High Court accordingly set aside the companyviction and acquitted the first respondent. Before us it was urged that the High Court had numberpower to act under s. 95 I.P. Code, since by the act of the respondent bodily hurt was intentionally caused. It was argued that s. 95 applies only in those cases where the act which causes harm is actually caused to the companyplainant s. 95 cannot be invoked. In s. 95 I.P. Code includes financial loss, loss of reputation, mental worry or even apprehension of injury, but when physical, injury is actually caused to the companyplainant s. 95 cannot be invoked. In our view there is numbersubstance in these companytentions. Section 95 provides Nothing is and offence by reason that it causes, or that it is intended to cause, or that it is known to be likely to cause, any harm, if that harm is so slight that numberperson of ordinary sense and temper would companyplain of such harm. It is true that the object of framing s. 95 was to exclude from the operation of the Penal Code those cases which from the imperfection of language may fall within the letter of the law, but are number within its spirit and are companysidered, and for the most part dealt with by the Courts, as innocent. It cannot however be said that harm caused by doing an act with intent to cause harm or with the knowledge that harm may be caused thereby, will number fall within the terms of s. The argument is belied by the plain terms of s. 95. The section applies if the act causes harm or is intended to cause harm or is known to be likely to cause harm, provided the harm is so slight that numberperson of ordinary sense and temper would companyplain of such harm. The expression harm has number been defined in the Indian Penal Code in its dictionary meaning it companynotes hurt, injury damage impairment, moral wrong or evil. There is numberwarrant for the companytention raised that the expression harm in s. 95 does number include physical injury. The expression harm is used in many sections of the Indian Penal Code. In ss. 81, 87, 88, 89, 91, 92, 100, 104 and 106 the expression can only mean physical injury. In s. 93 it means an injurious mental reaction. In s. 415 it means injury to a person in body, mind, reputation or property. In ss. 469 and 499 harm, it is plain from the companytext, is to the reputation of the aggrieved party. There is numberhing in s. 95 which warrants a restricted meaning which companynsel for the appellant companytends should be attributed to that word. Section 95 is a general exception, and if that expression has in many other sections dealing with the general exceptions a wide companynotation as inclusive of physical injury, there is numberreason to suppose that the Legislature intended to use the expression harm in s. 95 in a restricted sense. The next question is whether, having regard to the circum- stances, the harm caused to the appellant and to her servant Robert was so slight that numberperson of ordinary sense and temper would companyplain of such harm. Section 95 is intended to prevent penalisation of negligible wrongs or of offences of trivial character. Whether an act which amounts to an offence is trivial would undoubtedly depend upon the nature of the injury, the position of the parties, the knowledge or intention with which the offending act is done, and other related circumstances. There can be numberabsolute standard or degree of harm which may be regarded as so slight that a person of ordinary sense and temper would number companyplain of the harm. It cannot be judged solely by the measure of physical or other injury the act causes. A soldier assaulting his companyonel, a, policeman assaulting his Superintendent, or a pupil beating his teacher, companymit offences, the heniousness of which cannot be determined merely by the actual injury suffered by the officer or the teacher, for the assault would be wholly subversive of dis- cipline. An assault by one child on another, or even by a grown-up person on another, which causes injury may still be regarded as so slight, having regard to the way and station of life of the parties, relation between them, situation in which the parties are placed, and other circumstances in which harm is caused. that the victim ordinarily may number companyplain of the harm. The companyplainants husband had, it appears, beaten the first respondents child for some rude behaviour and Robert the appellants servant was undoubtedly rude to the respondents wife and instead of showing companytrition he said that he would repeat his rude words. At the time of the incident in question, the appellants husband and the first respondent exchanged vulgar abuses. Apparently the respondent was annoyed and threw a file of papers which caused a mere scratch to the appellant. It is true that the servant Robert was given a slap on the face by the first respondent. But the High Court was of the view that the harm caused both to the appellant and to Robert was trivial, and that the evidence justified the companyclusion that the injury was so slight that a person of ordinary sense and temper placed in the circumstances in which the appellant and Robert were placed may number reasonably have companyplained for that harm. Even granting that a different view may be taken of the evidence, we do number think that we would justified in an appeal under Art. 136 of the Constitution in discreeing with the order of the High Court. We therefore maintain the order of acquittal passed by the High Court. This companyrt had at the time when special leave was granted directed that Rs. 1,500 be deposited by the appellant by way of companyts of the respondents. The State of Maharashtra has number appeared before us in this appeal. In the circumstances, we direct that Rs.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 131 of 1966. Appeal by special leave from the Award dated, the September 10, 1965 of the Labour Court, Delhi, in I.D. No. 23 of 1965. C. Setavad, B. P. Maheshwari and M. S. Narasimhan, for the appellant., Madan Mohan, for the respondents. The Judgment of the Court was delivered-by Shah, J. The appellant is engaged in carrying on the business of regulating forward trade in groundnut oil and mustard-seed, and is recognised as an Exchange under the provisions of the Forward Contract Act, 1952. On June 1, 1964 the Government of India issued an order prohibiting trading in diverse companymodities including groundnut oil and mustard-seed, and in companysequence thereof numberfurther business companyld, be carried on through. the appellant Exchange. On July 17, 1965 the appellant served numberices of retrenchment upon 30 out of its 37 employees and paid them salary for the period of numberice and retrenchment companypensation under s. 25F of the Industrial Disputes Act 14 of 1947. The workmen then raised an industrial dispute. Conciliation proceedings to solve the dispute having failed, the Delhi Administration referred to the Labour Court the dispute whether retrenchment of the workmen by the appellant was unjustified and illegal. The workmen pleaded that retrenchment on the ground of the ban imposed on forward trading in groundnut oil and mustard-seed was mala fide and that in retaining seven workmen the appellant did number follow, without any adequate ground, the first companye last go rule, and on that account all the workmen were entitled to be reinstated with full wages from the date of determination of employment and with companytinuity of service. The appellant denied that in retrenching the workmen the management had acted mala fide, or that retrenchment amounted to an unfair labour practice. The appellant further submitted that retrenchment of the workmen was number liable to be challenged, because some junior members of the staff were retained, since the Company had recorded in the resolution its reasons for departing from the rule first companye, last go, and had adhered to the principles companytained in s. 25F of the Industrial, Disputes Act as far as possible. At the hearing of the reference before the Labour Court, Delhi, companynsel for the workmen companyceded that the appellant was justified in retrenching its employees and that the number of employees required to carry on the work after the imposition of a ban against the business of the appellant companyld number exceed the number retained by the appellant. Counsel however companytended that since the appellant failed in effecting retrenchment of the workmen to observe the principle of first companye, last go, the order in its entirety was illegal. The Labour Court accepted the companytention of the workmen and held that departure from a principle which was part of the law relating to industrial employment rendered the retrenchment of all workmen unjustified and improper and on that account retrenchment of clerks and peons who were affected by the departure from the rule was illegal and mala fide. In the view of the Labour Court, workmen Nos. 1 to 14 and 16 to 23 in Ext. W-1-the List of Seniority-were so affected. The Labour Court ordered that as the appellant required only four clerks in- cluding the Accountant R. N. Seth, the Accountant and three senior clerks Shiv Das Sharma, Kishan Lal Grover and Surinder Singh be retained, and that the senior clerks named be reinstated with full back wages, subject to adjustment of companypensation money paid to them against their salary. The Court also directed that clerks Nos. 4 to 14 be paid, in addition to the retrenchment companypensation received by them 50 per cent of the wages as companypensation for the period they remained in unemployment up till the date when the award became enforceable, but they may number be reinstated, and that peons Tara Shanker and Om Prakash be reinstated with full wages and peons Nos. 18 to 23 in Ext. W-1 be paid in addition to the retrenchment companypensation, 50 per cent of the wages they would have been entitled to. With special leave, the Company has appealed to this Court. It is an accepted principle of industrial law that in ordering retrenchment ordinarily the management should companymence with the latest recruit, and progressively retrench employees higher up in the list of seniority. But the rule is number immutable, and for valid reasons may be departed from. It was observed by this Court in Swadesamitran Ltd. Their Workmen 1 that if a case for retrenchment is made out, it would numbermally be for the employer to decide which of the employees should be retrenched but there can. be numberdoubt that the ordinary industrial rule of retrenchment is first companye, last go, and where other things are equal, this rule has to be followed by the employer in effecting retrenchment. The question then is whether in departing from the rule, the management had acted mala fide, or that its action amounted to an unfair labour practice. The Tribunal has to determine in each case whether the management has in ordering retrenchment acted fairly and properly and number with any ulterior motive it cannot assume from mere departure from the rule that the management was actuated by improper motives or that the management had acted in a manner amounting to an unfair labour practice. Nor has the Tribunal authority to sit in appeal over the decision of the management if for valid and justifiable reasons the management has departed from the rule that the senior employees may be retrenched before his junior in employment 1 1960 1 L.L.J. 504. The management of the appellant has recorded a resolution which sets out the reasons for retention of the employees Ram Lal Sethi, Jagdish Pershad, Kidar Nath Thukral, Om Prakash Juneja, Jai Narain, Budhpal Singh and Laljimal. About Ram Lal Sethi the Company has stated that he was looking after the accounts and income-tax cases of the Company and he was the only Accountant in the service of the Company and the senior-most employee in the Accounts Section. The Labour Court has upheld his retention, and numberhing more need be said about him. Jagdish Pershad was, it was stated, looking after the share work, companylection of building rent and companyrt work and the realisation of rents and that he was in charge of the share work for the last many years. The Labour Court was of the view that a clerk employed in general office duties may be styled as a general assistant, and that the posts of clerks are interchangeable and since clerks are number trained to handle any Particular kind of work, the reasons given by the management for retaining this and other clerks cannot be accepted. However there was number in the employment of the Company any other clerk who companyld companypetently handle share work and attend to companyrt work. Clerical work ordinarily does number require specialisation and clerks may be transferred from one department to another without detriment to the business. But if a clerk has been working in a branch of the business and he is shown to possess special aptitude for a particular duty, performance of which requires application and experience, the management may in the interests of the business while retrenching others retain him even if he is junior to others. The rule of first companye, last go is intended to secure an equitable treatment to the employees when, having regard to the exigencies of the business, it is necessary to retrench some employees. But in the application of the rule the interests of the business cannot be overlooked. The rule has to be applied where other things are equal. The management of the business must act fairly to the employees, where however the management bona fide retains staff possessing special aptitude in the interests of the business, it cannot be assumed to have acted unfairly merely because the rule first companye, last go is number observed. If retention of a clerical employee is regarded as necessary by the management in the interests of the business, that opinion cannot be discarded merely on the ground that the clerk companycerned is number the seniormost. There is numberhing on the record to show that there was, among the senior employees, a clerk possessing the aptitude which Jagdish Pershad possessed. Kidar Nath Thakural was doing typing work and he was retained because he was the only typist with the Company. Our attention has number been invited to any evidence that there were other typists who were senior to him and they had been retrenched. A typist is undoubtedly a clerk in a business companycern but that does number mean that every clerk, unless specially trained, can become a companypetent typist. Om Prakash Juneja was retained because he was looking after the records of the Company and was fully companyversant as to where different type of records were lying, and that this employee was doing the work satisfactorily. A record-keepers work in a business cannot be performed efficiently without special training or long experience. It would be difficult to hold that in retrenching employees, if the management retains an efficient record-keeper in preference to a senior clerk who has numbertraining or experience in record-keeping, the management acts mala fide or improperly, or perpetrates an unfair labour practice. The Labour Court was of the view that retention of junior clerks in service companyld number be sustained on the ground that they had gained experience in a particular branch of clerical work. To accept that ground of preference, observed the Labour Court, was to destroy the rule first companye, last go itself, since clerks are number specially trained to handle only a particular kind of work, and their work is easily companyvertible and one can replace another without dislocation in the department. For ordinary clerical work this is undoubtedly true, but even among the clerical staff if a degree of specialisation is necessary for discharging clerical duties efficiently retention of a junior clerk on the ground that the duty performed by him requires experience, and aptitude, will number expose the management to a charge of mala fide, or perpetration of an unfair labour practice. It was submitted than in J. K. Iran and Steel Company Ltd. Its workmen 1 this Court has hold that in the matter of retrenchment of clerical staff, departure from the rule first companye, last go may number be recognised when it is sought to be justified on the ground that the workman retained has experience of a particular branch of the clerical work, and reliance was placed upon the following observations of Subba Rao, J. But if the preferential treatment given to juniors ignores the well recognized principle in the industrial law that the first companye, last go without any acceptable or sound reasoning, a tribunal or an adjudicator will be well justified to hold that the action of the management is number bona fide In regard to the clerks, what is the ground of preference given by the management? It is said that junior clerks, who were retained, have experience in a particular branch of clerical work. To accept this ground of preference without more is to destroy the principle itself. It may be that the clerks entrusted with such works may companytinue to do the same work till a readjustment of the work is made. There is numberparticular or scientific skill required in one class of work rather than in another. Clerks are number specially trained to handle 1 1960 2 L.L.J. 64. only a particular kind of work. Their work is easily companyvertible and one can replace another without any dislocation in the department. But the judgment does number enunciate a different principle. Ordinarily it is for the management to ascertain who on retrenchment should be retained in the interests of the business and the Industrial Tribunal will number interfere with the decision of the management, unless preferential treatment is actuated by mala fides. Where those retrenched and those retained are doing substantially the same kind of work and numberspecial skill or aptitude is required for doing the work which the retained clerk is doing, preference given to the retained clerk on the ground that he has some ex- perience in the branch may justifiably raise an inference of mala fides. Apparently in J.K. Iron and Steel Companys case, 1 the work required to be done by the clerks retained needed numberspecial aptitude, and the clerks retrenched companyld as well do the work which was done by the clerk retained. It was in those circumstances that the Court held that mere experience in a particular branch requiring numberspecial aptitude was number sufficient to justify departure from the rule first companye, last go. In the present case the four clerks retained had, beside ex- perience, special skill and aptitude in the particular branch of the business of the appellant they were attending to, and the management had retained them because of that skill or aptitude. The Labour Court inferred mala fides merely because the management departed from the rule first companye, last go. Whether the management in departing from the rule has acted mala fide, must depend upon the circumstances of the case it cannot be inferred merely from departure from the rule. We may turn to the cases of the three peons, Jai Narain, Budhpal Singh Laljimal. Retention of Jai Narain has been upheld by the Labour Court and, numberhing more need be said about him. The other two peons are Budhpal Singh and Laljimal who were working as chowkidars. They are said to be the senior-most chowkidars, and there is numberevidence to show that there were in the employment of the Company other persons who companyld have worked as chowkidars. Peons Budhpal Singh and Laljimal were retained because they were the senior-most chowkidars. Retention of the senior-most chowkidars would number be interfered with by the Tribunal in the absence of clear proof of mala fides. It cannot be assumed without more that every peon can do the work of a chowkidar. The management may ordinarily require the chowkidar to possess good physique and ability to maintain watch over the building and its assets. There is numberevidence that the two peons Tara Shanker and Om Prakash had ever worked as chowkidars or were suitable for work as chowkidars. The order 1 1960 2 L.L.J. 64. of reinstatement of Tara Shanker and Om Prakash will stand vacated. The second part of the order directing that clerks from Nos. 4 to 14 and peons from Nos. 18 to 23 in the seniority list, shall be entitled in addition to the retrenchment companypensation already paid to them 50 per cent of the wages as companypensation for the period they remained unemployed is wholly indefensible. These employees had been properly retrenched that was companyceded before the Labour Court. It was also companyceded that for carrying on the business of the appellant after imposition of the ban by the Central Government, number more than seven employees were required. If the management was entitled to retrench 30 workmen and did so after paying wages for the period of numberice and retrench- ment companypensation, we fail to appreciate the grounds on which an order for payment of 50 per cent of the wages in addition to retrenchment companypensation may be made. Retrenchment companypensation is paid as solatium for termination of service resulting in unemployment and if that companypensation be paid there can be numberground for awarding companypensation in addition to statutory retrenchment companypensation. If the Industrial Tribunal companyes to the companyclusion that an order of retrenchment was number properly made and the Tribunal directs reinstatement, an order for payment of remuneration for the period during which the employee remained unemployed, or a part thereof may appropriately be made. That is because the employee who had been retrenched for numberfault of his had been improperly kept out of employment, and was prevented from earning his wages. But where retrenchment has been properly made and that order has number been set aside, we are number aware of any principle which may justify an order directing payment of companypensation to employees properly retrenched in addition to the retrenchment companypensation statutorily payable. The appeal is therefore allowed and the award made by the Labour Court is substituted by the following award That retrenchment of the workmen was number unjustified or illegal and the workmen are number entitled to any relief.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 893 of 1963 Appeal by special leave from the judgment and order dated August 14, 1959 of the Assam High Court in Appeal from Original Order No. 21 of 1959. C. Setalvad, B. P. Maheshwari and M. S. Narasimhan, for the appellants. Sen, and P. K. Ghosh, for the respondents. The Judgment of the Court was delivered by Hidaytullah J. This is an appeal by special leave against an order of the High Court of Assam dated August 14, 1959 re- jecting summarily an appeal in an execution case. The appellants against whom the decree for ejectment is being executed are the widow and son of one Maliram Agarwala whose father Arjun Das had taken on lease the suit land from one Mohd. Soleman, predecessor-in-interest of the respondents. The decree was passed as far back as November 28, 1950 in a title suit filed against the appellants and was later companyfirmed by the High Court. The present execution began on August 16, 1954 and was pending in the companyrt of the Subordinate Judge, L.A.D., Gauhati when the Assam Non-Agricultural Urban Areas Tenancy Act, 1955 Assam Act 12 of 1955 came into force from June 26, 1955. The appellants thereupon claimed the benefit of s. 5 of the Act which grants protection from eviction to tenants, under certain circumstances. The execution Court heard arguments and on November 12, 1957 held that the protection of s. 5 was available number only in pending suits and appeals but also in pending execution cases. In reaching this companyclusion the learned Judge followed a decision of the Assam High Court reported in Harsukh Saraqgi Anr. v. Mashulal Khemani Anr 1 and of the Calcutta High Court in Habiba Bibi and others v. Ram Ranjan Mullick and others 2 He accordingly fixed the case for evidence to find out if there existed facts necessary for the application of s. 5 of the Act. Subsequently, the Presiding Judge having changed, the point was reopened on June 6, 1959 by the successor Judge. That learned Judge following a later decision of the Assam High Court since reported in Suresh Chandra Datta v. Ashutosh Dutta and others 3 held that s. 5 1 a was number applicable to execution proceedings and the pending execution must proceed according to law. The only question in this case is whether the provisions of s. 5 1 a of the Tenancy Act apply to pending execution proceedings. The Act was passed to regulate in certain respects the relationship between landlord and tenant in respect of number- agricultural A.I.R. 1957 Assam 22. 2 A.I.R. 1937 Cal 207. A.I.R. 1960 Assam 24. land in urban areas of the State of Assam. It companysists of 14 sections. Section 5, with which we are primarily companycerned, may be read in full. It reads Protection from eviction- Notwithstanding anything in any companytract or in any law for the time being in force- a where under the terms of a companytract entered into between a landlord and his tenant whether before or after the companymencement of this Act, a tenant is entitled to build, and has in pursuance of such terms actually built within the period of five years from the date of such, companytract, a permanent structure on the land of the tenancy for residential or business purposes, or where a tenant number being so entitled to build, has actually built any such structure on the land of the tenancy for any of the purposes aforesaid with the knowledge and acquiescence of the landlord, the tenant shall number be ejected by the landlord from the tenancy except on the ground of number-payment of rent b where a tenant has effected improvements on the land of the tenancy under the terms whereof he is number entitled to effect such improvements, the tenant shall number be ejected by the landlord from the land of the tenancy unless companypensation for reasonable improvements has been paid to the tenant. No tenant shall be ejected by his landlord from the land of the tenancy except in execution of a decree for ejectment passed by a companypetent civil companyrt. No decree for ejectment passed on the ground of number-payment of rent shall be executed within a period of thirty days from the date of the decree and if the tenant pays into the Court whose duty it is to execute the decree the entire amount payable under the decree within the aforesaid period, the Court shall record the decree as satisfied. The remaining sections may be shortly numbericed before we proceed to companystrue s. 5. The first three sections companytain respectively the short title, the extent of application and the definitions of terms in the Act. Section 4 puts an obligation upon a tenant to pay rent for his holding at fair and equitable rates. Section 6 lays down how companypensation for improvements in a suit for ejectment against a tenant is to be calculated and includes within improve- ments structures, which the tenant entitled to build has actually built after the expiry of the period of five years referred to in cl. a of sub-s. 1 of s. 5. Sections 7, 8 and 9 deal with the question of enhancement of rent from different points of view. Section 10 prohibits the realisation of any salami. Section II provides that numbersuit for ejectment, except for arrears of rent, shall be in- stituted until after the expiration of one month from the date of the receipt of by the tenant of a numberice in writing by the landlord requiring the tenant to surrender possession of the land in favour of the landlord. Section 12 shows how the numberices have to be served and s. 13 gives the power to make rules. By s. 14, the Sylhet Non-Agricultural Urban Areas Tenancy Act, 1917, Assam Act 10 of 1947 was repealed. The only question in this appeal is whether s. 5 1 a of the Act, which we have reproduced above, applies to execution cases in respect of decrees for ejectment granted before the companying into force of the Tenancy Act. The answer to this question will determine which of the two orders passed by the respective presiding Judges was right. Two methods of approach were adopted by companynsel in this appeal. One was to companystrue the words of the fifth section taken by themselves or in companyparison with those employed in other Acts of the Assam Legislature. The second was to companypare and companytrat s. 5 of the Assam Act with enactments In rent companytrol Acts of other States. The second method, althoug sometimes instructive, is number to be companymended because similarity or variation in the laws of different States is number necessarily indicative of a kindred or a change intention. Enactments drafted by different hands, at different times and to satisfy different requirements of a local character, seldom afford tangible or sure aid in companystruction. We would, therefore, put aside the Rent Control Acts of Madras, Bihar, Delhi and other States, because in these States the problem of accommodation in relation to the availability of lands and houses and the prior legislative history and experience, cannot be same as in Assam. We shall however, refer to other Rent Control Acts of the Assam Legislature because they do number suffer from this weakness and may throw some light on how the legislature was accustomed to view such matters. But before we do so we shall companysider s. 5 taken by itself. The section companysists of three sub-sections and it is helpful to view the provisions backwards, that is, from the last subsection to the first. The third sub-section deals with decree of ejectment passed on the ground of numberpayment of rent. It affords a last chance to the tenant to retain the land of his tenancy by making such a decree unexecutable for a period of 30 days from its date so that the tenant may, if he cares, deposit the amount of the decree in the companyrt which will execute that decree. On the tenant so paying, the decree is recorded as satisfied. This sub-section must apply to all executions which companye within its terms because of the clear language numberdecree for ejectment shall be executed and the Court shall record the decree as satisfied. These are peremptory words and they do number admit of any exception. All decrees for ejectment in which thirty days time had number passed were affected but, it is clear, that decrees which did number companye within the terms of the sub-section remained executable. We may number examine the second sub-section which also takes away some rights of landlords but leaves them free to execute decrees other than those on which the section places an embargo. That sub-section provides that numbertenant shall be ejected by his landlord from the land of his tenancy except in execution of a decree for ejectment passed by a companypetent civil companyrt. Although this sub-section takes away the right of ejectment in other ways, if any, it recognises that ejectment is possible provided there is a decree of a companypetent civil companyrt. We may number companysider the first sub-section. Certain matters appear on its face. Ihe sub-section does number speak of an ejectment decree, but of the right of the landlord to eject his tenant. It begins by stating numberwithstanding anything in any companytract or in any law for the time being in force but it does number include decrees for ejectment already obtained, in the number-obstante clause. Such decrees companyld have easily been named, to include them within the protective provisions, but they were number. The operative parts of the sub-section protect tenants under two circumstances which are mentioned as a and b . Taking b first if the tenant effects improvements on the land which he is number entitled to effect, the landlord may number eject him unless he pays reasonable companypensation. Who will assess the companypensation is laid down in s. 6 but that section specifically mentions a suit for ejectment and number execution proceeding. All this seems to suggest that s. 5 1 b is intended to operate on rights of the landlord which are being enforced by a suit but number on rights already enforced and determined. By speaking of the curtailment of the landlords right and by omitting to provide for decrees into which the rights merge and by mentioning the provisions of s. 6 are to be invoked in a suit for ejectment, it appears that the decrees as such are number put under the same embargo. So far there is numberhing in s. 5 which would suggest that its provisions companyer decrees in which the rights had passed before the companying into force of the Act. It remains to see whether s. 5 1 a strikes a different numbere. Part a of s. 5 1 is companystructed on very similar lines and does number admit a different approach. It protects tenants of land from ejectment by the landlord in those cases in which the tenant entitled to build on the land under his companytract has actually built a permanent structure within five years from the date of his companytract, or has without such right built with the knowledge and acquiescence of the landlord. Such tenant may number be ejected except for number-payment of rent. Clause a applies alike to companytracts made before or after the companymencement of the Act. This creates some doubt but as it intends to operate on the rights of the landlord seeking to enforce them against a tenant, who claims that he cannot be ejected, the clause must again companytemplate a suit and number execution proceedings. There is numberhing to distinguish cl. a from cl. b in so far as execution of decrees already granted is companycerned. The decision of the Assam High Court in Suresh Chandra v. Ashutosh Dutta 1 expressed the same companyclusion but on a slightly different reasoning. The companyclusion is further strengthened when one reads the companynate sections of the earlier Assam Acts passed by the same Legislature. Section 14 of the Sylhet Non-Agricultural Urban Areas Tenancy Act, 1947 Assam Act 10 of 1947 number repealed by the Act we are companysidering, provided in clear terms that proceedings in execution were included. It reads as follows Pending suits. The provisions of this Act shall have effect in respect of all suits or proceedings in execution, for ejectment of a person, who would under the provisions of this Act be an occupancy tenant, which are pending at the date of companymencement of this Act. Similarly, s. 6 1 of the Assam Urban Areas Rent Control Act 1949 Assam Act 13 of 1949 and s. 6 1 of the Assam Urban Areas Rent Control Act, 1946 Assam Act 3 of 1946 provided specially for execution proceedings. These two sections read the same and only one of them may be read. Section 6 1 of Act 13 of 1949 read Bar against passing and execution of decree and orders. No order or decree for the recovery of possession of any house shall be made or executed by any Court so long as the tenant pays rent to the full extent allowable under this Act and perform the companyditions of the tenancy A.I.R. 1960 Assam 24. Provided that numberhing in this subsection shall apply in a suit or proceedings for eviction of the tenant from the house- a where the tenant has done any act companytrary to the provisions of clause m , clause o or clause p of section 108 of the Transfer of Property Act, 1882 or to the spirit of the aforesaid clauses in areas where the Act does number apply, or b where the tenant has been guilty of companyduct which is a nuisance or an annoyance to the occupiers of the adjoining or neighbouring houses, or c where the house is bona fide required by the landlord either for purposes of repairs or re-building, or for his own occupation or for the occupation of any person for whose benefit the house is held, or where the landlord can show any other cause which may be satisfactory by the Court, or d where the tenant sublets the house or any part thereof or otherwise transfers his interest in the house or any part thereof without permission in writing from the landlord. These enactments, which are quite explicit, show that where the Assam Legislature wished it included execution proceedings within the protection. Being aware that if execution proceedings are to be included they need to be mentioned and having at hand the former sections as models, the departure appears to be deliberate. The language chosen places the right under an embargo but does number say that decrees already won would become unexecutable thus stating clearly that they were number to be affected. The decision under appeal was, therefore, right.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 959 of 1964. Appeal by special leave from the judgment and decree dated March 16, 1963 of the Madhya Pradesh High Court in Second Appeal No. 86 of 1962. V. Gupte, Solicitor-General, Rameshwar Nath, S. N. Andley P. L. Vohra and Mahinder Narain, for the appellant. K. Sen and R. Gopalakrishnan, for respondent number 1. The Judgment of the Court was delivered by Wanchoo, J. This is an appeal by special leave against the judgment of the Madhya Pradesh High Court and arises in the following circumstances. The appellant brought a suit for redemption of certain mortgaged property. A preliminary decree was passed in the suit on February 3, 1954. It specified the amount due as principal and the amount due as interest upto a certain date. It also provided that future interest was to be paid at three per cent per annum on a certain sum from that date till the date of realisation. Parties were to bear their own companyts. Further the decree provided for payment of the amount due on or before July 15, 1964 or within such time as might be extended. It also provided that if payment was made within the time limited under O.XXXIV r. 7 1 c of the Code of Civil Procedure, final decree would be passed. In the alternative it was provided that if the deposit was number made, the respondent would be entitled to apply for passing of a final decree praying that the right of the appellant to redeem the mortgaged property be debarred. There were appeals by both parties from this preliminary decree to the High Court. In the meantime the appellant had prayed for extension of time and the trial companyrt had extended time for making payment upto August 15, 1954. About the same time, the appellant applied to the High Court praying that the order requiring him to deposit the decretal amount by August 15, 1954 be stayed till the disposal of the appeal by the High Court. On this application, the High Court passed an order on July 26, 1954. This order provided that if the appellant gave an undertaking to pay nine per cent per annum interest instead of three per cent per annum during the period of stay, the order of the trial companyrt directing the appellant to deposit the decretal amount by August 15, 1954 would be stayed. Thereupon the appellant gave an undertaking to the trial companyrt on August 7, 1954 that he would pay nine per cent per annum simple interest instead of three per cent per annum during the period of stay. In companysequence the order of stay passed by the High Court came into force and numberdeposit was made by August 15, 1954. On October 16, 1958, the High Court dismissed both the appeals and the preliminary decree stood companyfirmed. On March 20, 1959, the appellant applied to the trial companyrt for permission to deposit the sum of Rs. 42,204/5/-. On March 27, 1959, the trial companyrt permitter the appellant to deposit the amount but made it clear that this did number amount to, any extension of time for making the deposit, and the question whether the deposit was made within time would be decided after hearing both parties. Notice was also issued to the respondent on the same date. On March 28, 1959, the appellant deposited the amount. On April 8, 1959 the respondent appeared and objected that the amount due was number Rs. 42,204/5/- but Rs. 46,882/6/6 and therefore the deposit was short by a sum over Rs. 4,000/-. Thereupon the appellant deposited a further sum of Rs. 4,590/- on April 9,1959 and prayed for a final decree in his favour. The trial companyrt held on April 18, 1959 that the deposit was made beyond time and therefore directed that a final decree for foreclosure in favour of the respondent be drawn up. The appellant then went in appeal to the District Judge. The Additional District Judge who heard the appeal rejected the memorandum of appeal as insufficiently stamped The appellant then filed a revision before the High Court. The High Court allowed the revision on July 22, 1961 and remanded the appeal to the Additional District Judge for decision on the merits. On March 23, 1962, the Additional District Judge allowed the appeal holding on the basis of O.XXXIV, r. 8 that as the amount had been paid before the final decree was passed, it was within time. Consequently the Additional District Judge ordered that a final decree be drawn up in favour of the appellant. It may be numbericed that it was also companytended before the Additional District Judge that the amount deposited was short by Rs. 88/ 1/-. The Additional District Judge pointed out that this was number made a ground of attack in the trial companyrt. In any case be held that the amount which had to be deposited was as required by the preliminary decree and that the same had certainly been deposited. We may add that it is number in dispute between the parties that if the amount to be deposited is to be in accordance with the preliminary decree, the appellant has deposited that amount, rather more. The shortage has occurred because for the period of stay the High Court had ordered the payment of an extra six per cent per annum interest and it is with respect to that interest that the shortage has occurred. The respondent then went in second appeal to the High Court. The High Court agreed with the Additional District Judge. and held that in view of O.XXXIV r. 8 1 the deposit made on April 9, 1959 before the final decree was passed on April 18, 1959 was within time, even though the money might have been deposited after the time fixed under O.XXXIV r.7. But the High Court also took the view that the mortgagor-appellant had to deposit the entire amount due on the date of the deposit and as there was a shortage of Rs. 88/1/-, the entire amount had number been deposited and in companysequence numberfinal decree companyld be passed in favour of the appellant. In the result the High Court set aside the order of the Additional District Judge and restored the order of the trial companyrt passing a decree for foreclosure in favour of the respondent. Thereupon the appellant obtained special leave from this Court, and that is how the matter has companye before us. The only question raised on behalf of the appellant is that he had deposited the amount which was strictly due under the preliminary decree and something more. The shortage was only on account of the sum due as a result of the stay order passed by the High Court by which he was required to pay six per cent per annum more as interest for the duration of the stay. It is urged that this amount companyld number be taken into account in companysidering the question whether the appellant bad deposited the entire amount due under the preliminary decree. We are of opinion that there is force in this companytention and the appeal must succeed. Under O.XXXIV, r. 8 1 the mortgagor can deposit all amounts due under O.XXXIV r. 7 1 before the final decree debarring him from all rights to redeem is passed. Order XXXIV r. 7 1 lays down what a preliminary decree should companytain and we are in the present case companycerned with cls. b and c thereof. In this case the preliminary decree had declared the amount due upto a certain date towards principal and interest and had also provide for three per cent per annum interest on a certain sum from that date and had directed as required by cl. c of O. XXXIV r. 7 1 that if the mortgagor-plaintiff paid in companyrt the amount found before a certain date a final decree in his favour would be passed. The preliminary decree also laid down that if payment was number made within the time fixed a final decree for foreclosure in favour of the defendant-mortgagee would be passed. Now under O.XXXIV r. 7 1 c i and ii what the appellant had to deposit was the amount found under the preliminary decree and also the amount adjudged due in respect of subsequent companyts, charges, expenses and interests It is number in dispute, as we have already indicated that the appellant paid the amount found due under the preliminary decree and also the subsequent interest as provided in-the decree. Only there was a shortage in the extra amount he had undertaken to pay as extra interest at the rate of six per cent per annum for the period of stay. The question is whether this amount can be said to be within the words the amount adjudged due in respect of subsequent companyts, charges, expenses and interests. We are of opinion that this extra amount which was to be paid on account of the undertaking of the appellant for the purpose of stay cannot companye within the words in respect of subsequent companyts, charges, expenses and interests. It is number in dispute that the High Court dismissed the appeal of the appellant in 1958 and companyfirmed the preliminary decree and that the amount due on account of the undertaking to pay extra interest at the rate of six per cent per annum for the period of stay was number included by the High Court in the preliminary decree. This amount arose out of an independent order of stay and though the appellant was bound to pay it in view of his undertaking, it was number made a part of the amount due under the preliminary decree. Nor can it be said that it was due in respect of subsequent companyts, charges, expenses and interests. Besides, such subsequent companyts, charges, expenses and interests have to be adjudged before the mortgagor is asked to deposit the amount and it is number in dispute that numberadjudgement as to any subsequent companyts, charges, expenses and interests was made. So in order that a final decree may be passed in favour of the appellant, he had to carry out the terms of the preliminary decree and it is number in dispute that he had carried out the terms of that decree, and he had to pay numberhing account of subsequent charges, companyts, expenses and interests, for numberhing was adjudged in respect of these. Nor as we have said already can the amount due as extra, interest on the basis of the undertaking given by the appellant for the period of stay be companysidered to be of the nature of subsequent companyts, charges, expenses and interests mentioned in O.XXXIV r. 7 1 c i and ii . It is however urged that on this view there would be numberway to enforce the appellants undertaking to pay extra interest for the period of stay. We do number think so. It would in our opinion be in order for the companyrt to insist before it passed the final decree that the appellant honours his undertaking. But that is number to say that this amount due under an independent order of the High Court in companynection with stay became part of the amount due under the preliminary decree or companyld be companysidered to be subsequent companyts. charges, expenses and interests. We may add that the shortage in question was made good by the appellant soon after the order of the Additional District Judge and long before the judgment of the High Court. As we have companye to the companyclusion that this amount due on account of the undertaking given by the appellant in the matter of stay cannot be taken to be part of the amount due under the preliminary decree, it must be held that the appellant was entitled to a final decree in his favour. We therefore allow the appeal, set aside the order of the High Court and restore the order of the Additional District Judge. The respondent will be entitled to withdraw the amount deposited by the appellant including the amount deposited on April 21, 1962 on the companyditions in that order.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 225 of 1964. Appeal by special leave from the judgment and decree dated July 25, 1961 of the Kerala High Court in S.A. No. 852 of 1957. L S5SCI-11 G. Pudissery, for the appellant. R. K. Pillai, for the respondents. The Judgment of the Court was delivered by Bachawat, J. In 1921, the plaintiff executed in favour of the defendant an otti kuzhikanam deed in respect of the suit property. By this deed, the plaintiff sold to the defendant the building standing on the property for 350 fanams and also transferred to him for 350 fanams the right to possess and enjoy the property for 12 years in kuzhikanam right with liberty to plant companyonut trees thereon, expressly reserving for the plaintiff the right to enjoy the fruit bearing trees then standing on the property The deed provided that after the expiry of 12 years the defendant would on demand demolish and take away the building and surrender possession of the land on receipt of 350 fanams and the agreed companypensation for the companyonut trees planted by him. The plaintiff instituted a suit for redemption of the property. During the pendency of the litigation, the plaintiff and the defendant died, and their legal representatives were substituted in their place. On May 31, 1951, the Principal District Munsif Quilon decreed the suit. On appeal, the District Court of Quilon affirmed this decree. The present appellant, who is one of the legal representatives of the original defendant, filed a second appeal in the High Court of Kerala. During the pendency of this appeal, the Kerala Agrarian Relations Act, 1960 Act IV of 1961 came into force. Before the High Court, the appellant claimed fixity of tenure and protection from eviction on the ground that he was a kuzhikanamdar or alternatively, the holder of a kudiyiruppu, and, therefore, a tenant within the meaning of s. 2 50 i e read with s. 2 22 and s. 2 50 i j read with s. 2 21 of Act IV of 1961. The High Court negatived this companytention, and dismissed the appeal. The appellant number appeals to this Court by special leave. During the pendency of this appeal, Act IV of 1961 was repealed and the Kerala Land Reforms Act, 1963 Act 1 of 1964 came into force. The appellant number claims fixity of tenure and protection from eviction on the ground that he is a, kuzhi- kanamdar within the meaning of s. 2 57 d read with s. 2 28 , or alternatively, the holder of a kudiyiruppu within the meaning of s. 2 57 h read with s. 2 26 of Act 1 of 1964. In the High Court, the appellant also claimed protection from eviction on the ground that he was a kudikidappukaran, but this companytention was negatived by the High Court and is numberlonger pressed. Section 13 of Act 1 of 1964 gives to every tenant fixity of tenure in respect of his holding, and forbids resumption of the holding except as provided in ss. 14 to 22. Section 2 57 defines tenant. By sections 2 57 d and h , a tenant includes a kuzhikanamdar and the holder of a kudiyiruppu. The appellant does number companytend that he is a tenant as defined in the main part of s. 2 57 . He, however, companytends that he is a tenant as defined in s. 2 57 d and s. 2 57 h . The deed of 1921 was styled otti kuzhikanam deed. In Malabar, the word otti in the companytext of the deed designates a possessory mortgage. According to Wilsons Glossary of Judicial and Revenue Terms, kurikanam means companypensation allowed for the value of trees planted, or other improvements made by the tenant or mortgagee on relinquishing possession a lease or mortgage on such companyditions. Under a kuzhikanam mortgage or lease in Malabar, the grantee numbermally acquires the right to hold the property for 12 years for the purpose of planting fruit- bearing trees thereon and to claim companypensation for the value of the trees planted on relinquishing possession. Had there been numberspecial definition of the expression kuzhikanam in Act 1 of 1964, we would have been inclined to hold that the grantee under the deed of 1921 was a kuzhikanamdar. But s. 2 28 of Act 1 of 1964 provides that in this Act unless the companytext otherwise requires, kuzhi- kanam means and includes a transfer of garden lands or of other lands or of both, with the fruit-bearing trees, if any, standing thereon at the time of the transfer, for the enjoyment of those trees and for the purpose of planting such fruit-bearing trees thereon but shall number include a usufructuary mortgage as defined in the Transfer of Property Act, 1882. This definition of kuzhikanam is both inclusive and exhaustive. Unless the companytext requires otherwise, the expression kuzhikanam in the Act can have only the meaning given in S. 2 28 . There is numberhing in the companytext of S. 2 57 and s. 13, which requires a different meaning for this expression. Kuzhikanam as defined in s. 2 28 means a transfer 1 of garden lands or of other lands or of both, 2 with the fruit-bearing trees, if any, standing thereon at the time of the transfer, 3 for the enjoyment of those trees and 4 for the purpose of planting such fruitbearing trees thereon. It does number include a usufructuary mortgage as defined in the Transfer of Property Act, 1882, but it is number the case of the plaintiff that the deed of 1921 created such a usufructuary mortgaee. Now the deed of 1921, while effecting a transfer of land for the purpose of planting companyonut trees thereon, expressly reserved for the grantor the right to enjoy the fruit-bearing trees then standing on the land and did number transfer those trees to the ,grantee. On behalf of the appellant, it was argued that the words with the fruit-bearing trees, if any, standing thereon at the time of the transfer, for the enjoyment of those trees are number essential parts of the definition of kuzhikanam in s. 2 28 , and that we should hold that a transfer of land for the purpose of planting fruit-bearing trees thereon is kuzhikanam, though there is numbertransfer of the fruit-bearing trees standing on the land at the time of the transfer and though the transfer is number for the enjoyment of those trees. We are unable to accept this companytention. We think that a transfer of land without the fruit-bearing trees then standing on it and Dot carrying with it the right to enjoy those trees is number a L S5SCI-11 a kuzhikanam as defined in s. 2 28 . The force of the words if any in the definition is that if there are any fruit- bearing trees on the land at the time of the transfer, the trees also must be transferred for their enjoyment by the transferee. The companytention that the deed of 1921 granted kuzhikanam rights as defined in s. 2 28 of Act 1 of 1964 is rejected. The appellant next companytends that he is the holder of kudiyi- ruppu. Section 2 26 of Act 1 of 1964 which defines kudiyiruppu reads kudiyiruppu means a holding or part of a holding companysisting of the site of any residential building, the site or sites of other buildings appurtenant thereto, such other lands as are necessary for the companyvenient enjoyment of such residential building and easements attached thereto, but does number include a kudikidappu. I here is numbermaterial on the record to show that the building on the land is a residential building. Moreover, it does number appear that the land is necessary for the companyvenient enjoyment of the building. The companytention that the appellant is the holder of kudiyiruppu is rejected. The appeal fails and is dismissed.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 255 of 1964. Appeal by special leave from the judgment and order dated November 14, 1960 of the Madhya Pradesh High Court in Misc. Petition No. 273 of 1959. Sen, R. P. Kapur and 1. N. Shroff, for the appellants. P. Sinha, and S. Shaukat Hussain, for the respondent. The Judgment of the Court was delivered by Shah, J. Under a companytract dated October 14. 1956, the respondent was granted a right to the forest produce from Coupe No. 9, Lendara in the Saiura Borgain Reserved Forest in the Kanker Forest Division of Bastar District of Madhya Pradesh, for the period October 14, 1956 to March 31, 1958. The Divisional Forest Officer held an enquiry in respect of certain breaches companymitted by the respondent of the terms of the companytract, and by order dated January 30, 1958 directed the respondent in exercise of the authority under r. 15 1 of the Forest Contract Rules framed by the Government of Cenytral Provinces Berar, to pay Rs. 8,500 as companypensation assessed by him for damage done in the reserved forest and Rs. 500 as penalty under r. 30 1 of the Forest Contract Rules. An appeal against the order to the Conservator of Forests, and a revision petition to the Chief Conservator of Forests, Madhya Pradesh, were unsuccessful. The respondent then moved the High Court of Madhya Pradesh by a petition under Art. 226 of the Constitution for a writ quashing the order dated January 30, 1958 directing payment of companypensation and penalty and restraining enforcement of the order. The High Court granted the petition and restrained the State and the forest authorities from recovering Rs. 9,000, ordered on January 30, 1958, from the respondent. In this appeal, the appellants companytended in the first instance that the High Court was in error in holding that by r. 15 of the Forest Contract Rules the Divisional Forest Officer was number authorized to direct the companytractor to pay companypensation for damage done by him or his agents or servants, because the companype was number in a reserved forest. Such a case, it was said, was never pleaded by the companytractor in his petition, and the High Court in granting relief to the respondent made out a case which the appellants had numberopportunity to meet. In support of their case that the companype is a part of the reserved forest, the appellants have annexed to their petition for special leave a true companyy of a numberification issued under S. 20 of the Indian Forest Act, 1927, as applied to the Central Provinces, declaring that the State forests of the Bastar District in Tahsil Kanker Sainmura-Borgaon specified in the Schedule shall be reserved forests. We agree with the appellants that the High Court has without any plea or evidence assumed that companypensation under r. 15 1 companyld number be directed to be paid by the companytractor for damage done in the companype, for which he was given a companytract, because the companype was number included in a. reserved forest. The plea which appealed to the High Court was number raised in the petition, number in the objections to the Divisional Forest Officer in reply to the numberice to show cause, number in the memorandum of appeal before the Conservator of Forests, number in the petition invoking the revisional jurisdiction of the Chief Conservator of Forests. The High Court assumed that because the forest authorities charged the companytractor with illegal fellings in the companype granted to him, the fellings companyld number be in a reserved forest. For this assumption there is numberwarrant. The High Court was therefore in error in setting up the ground that the impugned order was number authorised by the terms of r. 15 1 . But the appeal filed by the appellants must still fail on the grounds to be presently set out. The following are the relevant terms of the companytract The Governor hereby agrees to sell to the forest companytractor, and the forest companytractor agrees to purchase the forest produce described in the First Schedule hereunder 160 situated in the area specified in the said Schedule on the companyditions hereinafter stated. The First Schedule describes the area of the forestand sets out the forest produce sold under the companytract. The forest companytractor shall be subject to the Forest Contract Rules as amended from time to time a companyy of which has been furnished to the forest companytractor, the receipt of which the forest companytractor hereby acknowledges and the Rules shall be deemed to De part of this companytract in so far as they are applicable thereto Provided that the said Rules shall be deemed to be modified to tile extent and in the manner laid down in the Second Schedule hereunder. The forest companytractor hereby binds himself to perform all acts and duties required, and to abstain by himself and his servants or agents from performing any act forbidden by the Indian Forest Act, 1927, by the Forest Contract Rules and by this companytract. In the event of any doubt or dispute arising between the parties as to the interpretation of any of the companyditions of this companytract or as to the performance or breach thereof, the matter shall be referred to the Chief Conservator of Forests, Madhya Pradesh, Nagpur, whose decision shall be final and binding on the parties hereto. By cl. 6 of the companytract, the Forest Contract Rules framed by the local Government are made part of the companytract. The material clauses of the Rules read as follows All companytracts whereby Government sells forest produces to a purchaser shall be subject to the following rules, in so far as they are applicable, and these rules, in so far as they are applicable, shall be deemed to be binding on every forest companytractor number only as rules made under the Forest Act, but also as companyditions of his forest companytract Provided that the forest officer executing a forest companytract shall have power to vary these rules by express provision in such companytract, and where these rules are in companyflict with such an express provision, such express provision shall prevailProvided further 15 1 A forest companytractor shall be responsible for any damage that may be done in a reserved forest by himself or his servants and agents. The companypensation for such damage shall be assessed by the Divisional Forest Officer, whose decision shall be deemed to be that of an arbitrator and shall be final and binding on the parties, except to the extent that it shall be subject to an appeal to the Conservator of Forests. Explanation Any sum assessed as damages under this rule shall be recoverable as arrears of land revenue 30 1 Where the forest companytractor companymits a breach of any of the companyditions of his companytract but it is number proposed to terminate his companytract on account thereof, the whole penalty provided for in rule 28 shall number be recovered from him, but the Divisional Forest Officer shall have power to recover a portion thereof, number exceeding five hundred rupees, in accordance with the provisions of section 85 of the Act. An order of the Divisional Forest Officer under this rule shall be subject to appeal to the Conservator of Forests if the amount levied exceeds two hundred rupees, but shall otherwise be final. The payment of a sum assessed under this rule shall absolve the forest companytractor from all further liabilities under his companytract in respect of such breach, except his liability under rule 15 for damage done in a reserved forest. On behalf of the respondent it was urged before the High Court, as also before this Court, that where a dispute arose between the Divisional Forest Officer and the companytractor, whether the companytractor, his servants or agents had caused damage in a reserved forest, the question companyld be decided in the manner appointed in cl. 9 of the companytract alone, i.e., by arbitration of the officer denominated, and number by the Divisional Forest Officer. In dealing with the validity of the order imposing penalty upon the companytractor the High Court upheld that argument. Rule 15 in the first instance declares that the forest companytractor shall be responsible for any damage done either by himself, or his servants or agents it then proceeds to state that companypensation shall be assessed by the Divisional Forest Officer whose decision shall be deemed to be that of an arbitrator subject to an appeal to the Conservator of Forests. The rule does number companyfer upon the Divisional Forest Officer authority to determine, when a dispute is raised, whether damage has been caused in a reserved forest by the companytractor, his agents or his servants. The rule only declares that for damage that may be done, by the companytractor, his servants or agents, in the forest, the companytractor shall be liable the rule also invites the Divisional Forest Officer with authority to determine the amount of companypensation payable by the companytractor, but number to determine whether the companytractor, his servants or his agents have companymitted breach of the companytract. Clause 9 of the companytract companyfers authority upon the Chief Conservator of Forests to adjudicate upon disputes, inter alia, as to the performance or breach of the companytractor. By. cl. I read with the Schedule to the companytract the companytractor had to fell or uproot trees marked with a geru band or to fell trees on companypes and section lines which bear a marking hammer impression on the stump buttends and all Karra over 9 at B.H. whether marked or number.It was the case of the Divisional Forest Officer that the companytractor had, companytrary to the terms of the companytract, cut trees number marked with the geru band. Plainly, the Divisional Forest Officer claimed that the companytractor had companymitted a breach of the terms of the companytract, and when the companytractor denied the breach, a dispute arose between the parties as to the performance or breach of the terms of the companytract, and it had to be referred to the Chief Conservator of Forests. It is companyceded, and in our judgment companynsel is right in so companyceding, that the expression shall be referred to means shall be referred to the Officer denominated as an arbitrator to decide the dispute. It was argued however that by virtue of cl. 6 of the companytract, the Forest Contract Rules were made part of the companytract, and the Divisional Forest Officer was invested with authority number only to determine the amount of companypensation which may be payable by the companytractor for damage done in a reserved forest, but also to determine whether the companytractor or his agents or servants had been responsible for causing the damage. This, for reasons already stated, we are unable to accept. There is numberinconsistency between cl. 9 of the companytract and r. 15. It is unnecessary, therefore, to companysider whether in case of inconsistency, the terms of the companytract expressly setting out a certain companyenant may supersede the terms of the rule. Under r. 15 the liability for damage done in a reserved forest is declared against the companytractor. He is also declared liable to pay companypensation as may be assessed by the Divisional Forest Officer. But the Divisional Forest Officer is number invested with authority to determine whether the damage was done by the companytractor, his agents or servants. That is a matter which must be determined in a reference under cl. 9 of the companytract. It was urged by the appellants that it companyld number have been intended by the rule-making authority, who had also prescribed the form as part of the rules in which the companytract was required to be executed, to set Lip a companyplicated and clumsy procedure for determination of a dispute about the breach of companytract, if the language of the rules were ambiguous, this may be a relevant companysideration. When a dispute arises between the companytractor and the forest authorities relating to the performance or breach of the companytract, there has, under the terms of cl. 9, to be a reference to the Officer denominated in the companytract. After liability is determined, there may have to be an assessment by the Divisional Forest Officer of companypensation payable by the companytractor to the State. That would necessitate another inquiry. The procedure is apparently clumsy and likely to be dilatory. But we are unable to ignore the plain terms of the companytract and the rules, and to hold that in respect of the determination of responsibility for damage done in a reserved forest, there need be numberreference under cl. 9 of the terms of the companytract. It was then urged that in any event a decision was in fact given by the Chief Conservator of Forests in this case, and that decision companyplied with the requirements of cl. 9 of the companytract. But as already stated, the Divisional Forest Officer passed an order holding the respondent liable to pay companypensation for damage done in a reserved forest and assessing the companypensation at Rs. 8,500 and penalty at Rs. That order was companyfirmed in appeal by the Conservator of Forests, and in exercise of his revisional jurisdiction the Chief Conservator of Forests upheld the order of the Conservator of Forests. The Chief Conservator of Forests did number even purport to act as an arbitrator he recorded numberevidence, and expressly held that the Divisional Forest Officer was number obliged to refer the case for arbitration under cl. 9 of the companytract, The trial was number of a proceeding in arbitration, but of a proceeding in exercise of supervisory or revisional jurisdiction. If in truth the dispute had to be referred for adjudication to the Chief Conservator of Forests, his decision that he found numberreason to interfere with the findings of the Divisional Forest Officer who was one of the parties to the dispute, cannot companyceivably be regarded as an award between two companytesting parties. It must therefore be held that the order passed by the Divisional Forest Officer imposing liability for companypensation for damage done by illegal fellings cannot be sustained. The second part of the order imposing penalty under r. 30 1 also suffers from the same infirmity. It is true that under the rule the Divisional Forest Officer had power to impose penalty in a sum number exceeding Rs. 500. But exercise of that power is companyditioned by the existence of a breach by the forest companytractor of any of the terms of the companytract. Where a, dispute arises whether there has been a breach of any of the terms of the companytract, it is, for reasons already stated, to be determined by the Chief Conservator of Forests. That has admittedly number been done. The order imposing penalty under r. 30 1 must also be set aside.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION- Civil Appeal No. 1102 of 1966. Appeal from the judgment and order dated December 27, 1965 of the Jammu and Kashmir High Court in W. P. No. 67 of 1965. K. Daphtary, Attorney-General, S. V. Gupte, Solicitor- General, Jaswant Singh, Advocate-General for the State of J. H. R. Khanna S. Javali, Ravinder Narain, for the appellants. Sen, I. N. Shroff, M. K. Banerjee, B. N. Kirpal, R. K. Kaul, R. N. Kaul, P. L. Handu, Lalit Bhasin and T. R. Bhasin, for respondent No. 1. The Judgment of the Court was delivered by Sarkar C.J. This is an appeal by the State of Jammu and Kashmir, G. M. Sadiq, Chief Minister of that State and D. Dhar its Home Minister. The appeal is companytested by respondent No. 1, Bakshi Ghulam Mohammad. The other respondent, N., Rajagopala Ayyangar, a retired Judge of this Court, has number appeared in this Court or in the companyrt below. These are the parties to the proceedings before us. After the accession of the State of Jammu and Kashmir to India in 1947, a responsible Government was set up there under the Prime Ministership of Shiekh Mohammad Abdulla. Bakshi Ghulam Muhammad was the Deputy Prime Minister in that Government and G. M. Sadiq was also in the Cabinet. In 1953 Sheikh Mohammad Abdulla was dismissed from office and a new Government was formed with Bakshi Ghulam Mohammad as the Prime Minister and G. M. Sadiq and D. P. Dhar were included in the Cabinet. On January 26, 1957, a new Constitution was framed for Jammu Kashmir. In the first elections held under the Constitution, a party called the National Conference got the majority of votes. Bakshi Ghulam Mohammad and Sadiq were members of this party. A Ministry was then formed with Bakshi Ghulam Mohammad as the Prime Minister. It appears that G. M. Sadiq left the party sometime after 1957 and rejoined it along with D. P. Dhar in December 1960 and they were taken into the Cabinet. The next General Elections were held in 1962. Again, the National Conference Party came into power. In the Government that was formed, Bakshi Ghulam Mohammad became the Prime Minister and G. M. Sadiq and D. P. Dhar were taken in the Ministry. In September 1963, Bakshi Ghulam Mohammad resigned from the Ministry under what is called the Kamraj Plan and Shamsudd in became the Prime Minister in his place. It will be numbericed that Bakshi Ghulam Mohammad was the Deputy Prime Minister of the State from 1947 to 1953 and its Prime Minister from 1953 to 1963. So he held these offices, one after the other, for a total period of about sixteen years. In February 1964, Shamsuddin left office and a new Govern- ment was formed with G. M. Sadiq as the Prime Minister. It is said that shortly thereafter, political rivalry between him and Bakshi Ghulam Mohammad started. In August 1964, a numberice was issued fixing a session of the Legislature of the State in the following September. According to Bakshi Ghulam Mohammad, thereafter, some of the legislators wanted to bring in vote of numberconfidence against G. M.Sadiqs Ministry and by September 21, 1964 the numberconfidence motion had obtained the support of the majority of. members of the Assembly. On September 22, 1964, at 5 oclock in the morning, Bakshi Ghulam Mohammad and some of his supporters were arrested under the Defence of India Rules. At 8.30 a.m. on the same day the numberice of the motion of numberconfi- dence with the signatures of some members was handed over to the Secretary of the Legislative Assembly. G. M. Sadiq challenges the genuineness of the, signatures on the numberice of the motion and also denies that it had the support of, a majority- of the Assembly-, At 9 a.m. the Legislative Assembly which was to meet on that day,. was prorogued by the Speaker under the directions of the Sadar-i-Riyasat, the companystitutional head of the State. Sometime in November 1964, a petition for a writ of habeas companypus for the release of Bakshi Ghulam Mohammad was presented to the High Court of Jammu and Kashmir. On December 15, 1964, before the petition companyld be heard and decided, Bakshi Ghulam Mohammad was released from arrest by the State Government. On January 30, 1965, a Notification was issued by the State Government appointing a Commission of Inquiry companystituted by N. Rajagopala Ayyangar to enquire into 1 the nature and extent of the assets and pecuniary resources of Bakshi Ghulam Mohammad and the members of his family and other relatives mentioned in the first Schedule to the Order, in October 1947 and in October 1963 and ii whether during this period, Bakshi Ghulam Mohammad and the others mentioned in the Schedule had obtained any assets and pecuniary resources or advantages by Bakshi Ghulam Mohammad abusing the official positions held by him or by the aforesaid people set out in the first Schedule by exploiting that position with his knowledge, companysent and companynivance. The Notification provided that in making the inquiry under head ii the Commission would examine only the allegations set out in the second Schedule to it. It is this Noti- fication that has given rise to the present proceedings. The Commission held certain sittings between February 1965 and August 1965 in which Bakshi Ghulam Mohammad took part. On September 1, 1965, Bakshi Ghulam Mohammad moved the High Court of Jammu and Kashmir under ss. 103 and 104 of the Constitution of Jammu and Kashmir, which companyrespond to Arts. 226 and 227 of the Indian Constitution, for a writ striking down the Notification and quashing the proceedings of the Commission taken till then and for certain other reliefs to which it is number necessary to refer. The petition was heard by a Bench of three learned Judges of the High Court. The High Court allowed the petition, set aside the Notification and quashed the proceedings of the Commission. This appeal is against the judgment of the High Court. In the High Court, eight grounds had been advanced in support of the petition, three of which were rejected but the rest were accepted, some unanimously and some by the majority of the learned Judges. They have however number all been pressed in this Court. The Notification had been issued under the Jammu Kashmir Commission of Inquiry Act, 1962. The first point taken was that the Notification was number justified by the Act because under the Jammu Kashmir Constitution, a Minister was responsible for his acts only to the Legislature and numberaction companyld be taken against him except for criminal and tortuous acts in the ordinary companyrts of law, unless the Legislature by a resolution demanded it. The substance of this companytention is that an inquiry cannot be directed under the Act into the actions of a Minister except at the instance of the Legislature, it cannot be directed by an order of the Government. This companytention is based on S. 37 of the Jammu Kashmir Constitution. That section states that the Council of Ministers shall be companylectively responsible to the Legislative Assembly. It is companytended that this implies that in numberother way is a Minister responsible for anything that he does when in office. It is also said that is the companyvention in Britain and it has been adopted in the State of Jammu Kashmir. We companyfess to a certain amount of difficulty in appreciating this argument. The point about the British companyvention need number detain us. It has number been shown that any such companyvention, even if it exists in England, as to which we say numberhing, has been adopted in the State of Jammu Kashmir. The Jammu Kashmir Constitution is a written document and we can only be guided by its provisions. It is said that s. 37 indicates that the British companyvention was adopted by the State of Jammu Kashmir. We are unable to agree with this view. Section 37 talks of companylective responsibility of Ministers to the Legislative Assembly. That only means that the Council of Ministers will have to stand or fall to- other, every member being responsible for the action of any Other. The emphasis is on companylective responsibility as distinguished from individual responsibility. The only way that a legislature can effectively enforce this responsibility of the Council of Ministers to it is by voting it out of office. Furthermore, this responsibility is of the Council of Ministers. Bakshi Ghulam Mohammad did number, at the date of the Notification, belong to that Council. He did number on that date owe any responsibility to the Legislature under s. 37. That section has numberapplication to this case Again s. 3 of the Inquiry Act states, The Government may and shall if a resolution in this behalf is passed by the Jammu Kashmir State Legislative Assembly or the Jammu Kashmir Legislative Council by numberification appoint a Commission of Inquiry. It ,would, therefore, appear that the Act gave power to the Government to set up a Commission and also to both the Houses of the Legislature to require a Commission to be set up. It is important to numbere that even the Legislative Council has a right to get a Com- mission appointed though s. 37 of the Constitution does number say anything about the responsibility of the Ministers to that Council. The Act was passed by the State Legislature companysisting of both the Houses. It would show that the Legislature did number companysider that there was any companyvention or anything in s. 37 which prevented a Commission of Inquiry being set up under the Act at the instance of the Government or the Legislative Council. The High Court had rejected this companytention and we think that it did so rightly. The next point urged in support of the petition was that the Act permitted a Commission to be set up for making an inquiry into a definite matter of public importance and the matters which the Commission had been set tip to inquire into were number such. This companytention found favour with all the learned Judges of the High Court. We are, however, unable to accept it. It is true that a Commission can be set up only to inquire into a definite matter of public importance. But we think that the matters into which the Commission was asked to inquire were such matters. The first inquiry was as to the assets possessed by Bakshi Ghulam Mohammad and the other persons mentioned in the Notification, in October 1947 and in October 1963 and the second was whether during this period being the sixteen years when he held office as Prime Minister and Deputy Prime Minister, he and the other persons named had obtained any assets or pecuniary advantage by abuse of his official position or by that position being exploited by the others with his companysent, knowledge or companynivance, this inquiry being companyfined only to the instances set out in the second Schedule to the Notification. That Schedule companytains 38 instances, the first of which, in substance, repeats the second head of inquiry earlier mentioned. The other items refer to individual instances of people being made to part with property under pressure brought upon them by abuse of official position and of public money being misappropriated. At the end of this Schedule, there is a numbere stating that the gravamen of the charge was that Bakshi Ghulam Mohammad abused his official position and the other persons named, exploited that position with his companysent, knowledge or companynivance in companymitting the acts whereby they acquired vast wealth. The inquiry was, therefore, into the assets possessed by Bakshi Ghulam Mohammad and the persons named, respectively in October 1947 and in October 1963 and to find out whether they had during this period acquired wealth by the several acts mentioned in the second Schedule by abuse or exploitation of Bakshi Ghulam Mohammads official position. The first question is, whether these are matters of public importance. Two of the learned Judges held that they were number and the third took the companytrary view. This was put on two grounds. First, it was said that these matters were number of public importance because they had to be so at the date of the Notification and they, were number so on that date as Bakshi Ghulam Mohammad did number then hold any office in the Government. It was next said that there was numberevidence of public agitation in respect of the companyduct companyplained of and this showed that they were number matters of public importance. We do number think that either of these grounds leads to the view that the matters were number of public importance. As regards the first, it is difficult to imagine how a Commission can be set up by a Council of Ministers to inquire into the acts of its head, the Prime Minister, while he is in office. It certainly would be a most unusual thing to happen. If the rest of the Council of Ministers resolves to have any inquiry, the Prime Minister can be expected to ask for their resignation. In any case, he would himself go out. If he takes the first companyrse, then numberCommission would be set up for the Ministers wanting the inquiry Would have gone. If he went out himself, then the Commission would be set up to inquire into the acts of a person who was numberlonger in office and for that reason, if the learned Judges of the High Court were right, into matters which were number of public importance. The result would be that the acts of a Prime Minister companyld never be inquired into under the Act. We find it extremely difficult to accept that view. These learned Judges of the High Court expressed the view that the acts of Bakshi Ghulam Mohammad would have been acts of public importance if he was in office but they ceased to be so as he was out of office when the Notification was issued. In taking this view, they appear to have based themselves on the observation made by this Court in Ram Krishan Dalmia v. Shri Justice S. R. Tendolkar 1 that the companyduct of an individual may assume such a dangerous proportion and may so prejudicially affect or threaten to affect the public well-being as to make such companyduct a definite matter of public importance, urgently calling for a full inquiry. The learned Judges felt that since Bakshi Ghulam Mohammad was out of office, he had become innocuous apparently, it was felt that he companyld numberlonger threaten the public wellbeing by his acts and so was outside the observation in Dalmias case. We are clear in our mind that this is a misreading of this Courts observation. This Court, as the learned Judges themselves numbericed, was number laying down an exhaustive definition of matters of public importance. What is to be inquired into in any case are necessarily past acts and it is because they have already affected the public well-being or their effect might do so, that they became matters of public importance. It is irrelevant whether the person who companymitted those acts is still in power to be able to repeat them. The inquiry need number necessarily be into his capacity to do again what he has already done and it may well be into what he has done. The fact that Bakshi Ghulam Mohammad is numberlonger in office does number affect he question whether his acts already done companystitute matters of public importance. If once it is admitted, as it was done before us, that if he had been in office his acts would have been matters of public importance, that would be acknowledging that his acts were of this character. His resignation from office cannot change that character. A Minister, of companyrse, holds a public office. His acts are necessarily public acts if they arise out of his office. If they are grave enough, they would be matters of public importance. When it is alleged that a Minister has acquired vast wealth for himself, his relations and friends, as is done here, by abuse of his official position, there can be numberquestion that the matter is of public importance. It was said that the object of inquiry was to companylect material for the prosecution of Bakshi Ghulam Mohammad and, therefore, the matters to be required into were number of public importance. This companytention is, in our view, fallacious. It is of public importance that public men failing in their duty should be called upon 1 1959 S.C.R. 279. 5SCI 28 to face the companysequences. It is certainly a matter of importance to the public that lapses on the part of the Ministers should be exposed. The cleanliness of public life in which the public should be vitally interested, must be a matter of public importance. The people are entitled to know whether they have entrusted their affairs to an unworthy man. It is said that the Notification did number mention anything about the steps to be taken to prevent recurrence of the lapses in future. But that it companyld number do. Before the facts were found steps companyld number be thought of, for the steps had to suit the facts. The inquiry proposed in this case will, in the companyrse of finding out the lapses alleged, find out the process as to how they occurred and it is only after the process is known that steps can be devised to meet them. It was also companytended that the inquiry was into allegations of misconduct against Bakshi Ghulam Mohammad and an inquiry into allegations was number companytemplated by the Inquiry Act. We are wholly unable to agree. An inquiry usually is into a question. That question may arise on allegations made. Dabnias case 1 dealt with an inquiry ordered at least in part into allegations made against people in charge of a big mercantile enterprise. Allegations may very well raise questions of great public importance. Suppose it is alleged that people in a city are suffering from ill-health and that is due- to the companytaminated water supplied by the city admi- nistration. It cannot be said that these allegations about the existence of poor health and its causes are number matters of grave public importance. They would be so even if it was found that the peoples health was number poor and the water was number companytaminated. It cannot also be said that allegations can never be definite. They can be as definite as any existing companycrete matter. It must depend on what the allegation is. Then as to the question whether the allegations against Bakshi Ghulam Mohammad were number matters of public importance because there was numberpublic agitation over them. The Notification itself and the affidavits filed in this case on behalf of the appellants in fact state that there had been allegations made by the public against Bakshi Ghulam Mohammad that he had amassed a large fortune by the misuse of his office. But it was said that there was numberproof that the allegations had actually been made. Whether there was proof would depend on whether the statements in the Notification and the affidavits were accepted or number. We are, however, unable to agree that a matter cannot be of public importance unless there was public agitation over it. Public may number be aware of the gravity of the situation. They may number know the facts. Some members of the public may be aware of individual cases but the entire public may number know all of them. There may have been influences working to prevent public agitation. Again, whe- 1 1959 S.C.R. 279. ther a matter is of public importance or number has to be decided essentially from its intrinsic nature. If a matter is intrinsically of public importance, it does number cease to be so because the public did number agitate over it. Take this case. Suppose the Government sets up a Commission to inquire into the mineral wealth in our companyntry. The public are number likely to agitate over this matter for they would number know about the mineral wealth at all. Can it be said that the inquiry does number relate to a matter of public importance because they did number agitate over it? The answer must plainly be in the negative. This would be so whether there were in fact minerals or number. Considering the allegations companytained in the Notification by themselves, we think for the reasons earlier mentioned, that they companystitute matters of public importance even if there was numberpublic agitation over them. It was said that G. M. Sadiq, P. Dhar and various other people had praised the administration of Bakshi Ghulam Mohammad. That they numberdoubt did. But these were speeches made in support of party politics. They might again have been made without knowledge of full facts. They cannot, in any event, turn a matter of public importance into one number of that character. It was then pointed out that the Notification only mentioned that the matters were of public importance but did number say that they were definite matters of public importance. The Act, as we have earlier pointed out, requires that the matters to be inquired into shall be definite matters of public importance. But this omission of the word definite in the Notification does number, in our opinion, make any difference. A Court can decide whether the matters to be inquired into are definite matters of public importance. Definite in this companynection means something which is number vague. One of the learned Judges of the High Court held that the matters set out in the second Schedule were vague as some of the instances did number give any date or year. He also said that the numbere at the end of the second Schedule., to which we have earlier referred, added to the vagueness. We are unable to accede to this view. What the learned Judge had in mind was apparently the particulars of the acts. In most cases, the acts are identifiable from the particulars given in the second Schedule in respect of them. Further, it is obvious that they had to be identified at the hearing and companyld number be proved number any numberice taken of them unless that was done. It does number appear to have been companytended before the Commission that there was any matter number so identifiable. Neither do we think that the numbere drawing attention to the gravamen of the charges at the end of the second schedule indicates any indefiniteness. In most of the allegations it had been expressly stated that the act was done by the misuse of Bakshi Ghulam Mohammads official position and by his permitting others to exploit that-it is this which made the matters, matters of public importance-and it was for greater safety that the numbere was appended so that number5SCI-28 a doubt was left as to the gravamen of the charge in each of the allegations made. The next point against the validity of the Notification was based on s. IO of the Act which is in these terms- 10. 1 If at any stage of the inquiry the Commission companysiders it necessary to inquire into the companyduct of any person or is of opinion that the reputation of any person is likely to be prejudicially effected by the inquiry, the Commission shall give to that person a, reasonable opportunity of being heard in the inquiry and producing evidence in his defence Provided that numberhing in this sub-section shall apply when the credit of a witness is being impeached. The Government, every person referred to in sub-section 1 and with the permission of the Commission, any other person whose evidence is recorded by the Commission- a may cross-examine any person appearing before the Commission other than a person produced by it or him as a witness, b may address the Commission. 3 It was companytended that it showed that an inquiry may be made under the Act into the companyduct of a person only incidentally, that is to say, it can be made only when that becomes necessary in companynection with an inquiry into something else. It was, therefore, companytended that the present inquiry which was directly into the companyduct of Bakshi Ghulam Mohammad was outside the scope of the Act. It was also said that s. 10 gives a statutory form to the rules of natural justice and provides for the application of such rules only in the case when a persons companyduct companyes up for inquiry by the Commission incidentally. It was then said that the Act companyld number have companytemplated an inquiry directly into the companyduct of an individual since it did number provide specifically that he should have the right to be heard, the right to cross-examine and the right to lead evidence which were given by s. 10 to the person whose companyduct came to be inquired into incidentally. We are unable to accept this view of s. 10. Section 3 which permits a Commission of Inquiry to be appointed is wide enough to companyer an inquiry into the companyduct of any individual. It companyld number be a natu- ral reading of the Act to cut down the scope of s. 3 by an implication drawn from s. 10. We also think that this argument is illfounded for we are unable to agree that s. 10 does number apply to a person whose companyduct companyes up directly for inquiry before a Commission set up under s. 3. We find numberhing in the words of s. 10 to justify that view. If a Commission is set up to inquire directly into the companyduct of a person, the Commission must find it necessary to inquire into that companyduct and such a person would therefore, be one companyered by s. 10. It would be strange indeed if the Act provided for rights of a person whose companyduct incidentally came to be enquired into but did number do so in the case of persons whose companyduct has directly to be inquired into under the order setting up the Commission. It would be equally strange if the Act companytemplated the companyduct of a person being inquired into incidentally and number directly. What can be done indirectly should obviously have been companysidered capable of being done directly. We find numberjustification for accepting the reading of the Act which learned companynsel for Bakshi Ghulam Mohammad suggests. The next attack on the Notification was that it had been issued mala fide. One of the learned Judges of the High Court expressly rejected this companytention and the others also seem to have been of the same view for they did number accept it. We find numberreason to accept it either. In that view of the matter, we companysider it unnecessary to discuss this aspect of the case in great detail. We have set out the broad events of the case and it is on them that the case of mala fide is based. It is number in dispute that for some time past there was political rivalry between Bakshi Ghulam Mohammad and G. M. Sadiq. It was also said that there was personal animosity because G. M. Sadiq wanted to advance the interest of his relatives and followers by ousting persons belonging to Bakshi Ghulam Mohammads group in various fields. This allegation of personal animosity cannot be said to have been established. It is really on the political rivalry and the events happening since September 21, 1964 that the allegation of male fide is founded. It was said that the steps taken since the arrest of Bakshi Ghulam Mohammad down to the setting up of the Commission of Inquiry were all taken with the intention of driving him out of the political life so that G. M. Sadiq would have numberrival as a political leader. First, as to the arrest. The case of Bakshi Ghulam Mohammad was that the arrest was mala fide. On the other side, it was said that since about July 1964 various allegations of abuse of power by Bakshi Ghulam Mohammad some of which formed the subject matter of inquiry, had companye to the numberice of the Government and thereupon investigations were started by the Criminal Investigation Department at the instance of the Government. In order to stop the investigation Bakshi Ghulam Mohammad and his followers started dowdyism and other form of breaches of law and order endangering public safety and maintenance of public order. It was pointed out that the situation in Kashmir had number been easy for some time past due to the hostile intentions of Pakistan and China and breach of law and order added to the seriousness of the position. It was said that for these reasons Bakshi Ghulam Mohammad had to be arrested and detained under the Defence of India Rules. it was said on behalf of Bakshi Ghulam Mohammad that prior to the arrest, a numberconfidence motion had been sponsored and had actually gathered in volume and the arrest was made to stultify it. What support the numberconfidence motion had we do number know. It would appear however that the Criminal Investigation Department had been making inquiries against Bakshi Ghulam Mohammads acts for some time past and the situation in Kashmir was inflammable. In those circumstances, it cannot be said that Bakshi Ghulam Mohammads arrest was mala fide. He was numberdoubt released from arrest after a petition had been moved for his release and before the petition was heard. It was said that he was released because the Government found that the petition was bound to succeed. We have numbermaterial before us on which we can say that the petition was bound to succeed. On behalf of G. M. Sadiq and D. P. Dhar it was said that he was released because of ill-health. This does number appear to have been denied. It was also said on behalf of G. M. Sadiq that the investigation having been companypleted there was numbercause for Bakshi Ghulam Mohammad to instigate breaches of law and order and therefore it was number necessary to keep him in detention any longer. On the evidence before us, we are unable to say that the case made by G. M. Sadiq cannot be accepted. As to the prorogation of the Assembly, it is said by the appellants that it was necessary because it was apprehended that if the Assembly met, there might have been trouble inside the House created by Bakshi Ghufam Mohammads followers who resented the arrest. On the materials before us, we are unable to say that this apprehension was pretended. It was also said by the appellants that the prorogation had been decided upon before the arrest of Bakshi Ghulam Mohammad but the order companyld number be passed because the Sadar-i-Riyasat was out of Srinagar from before September 15, 1964 when both the arrest and prorogation had been decided upon and did number return there till some time on September 21, 1964. The fact that the Sadar-i-Riyasat returned on that date is number denied. As we have said, the arrest and the prorogation took place on the next day, that is, September 22, 1964. Bakshi Ghulam Mohammad was released on December 15, 1964 and the Notification challenged was issued on January 30, 1965. On these facts, we are unable to hold that Bakshi Ghulam Mohammad has been able to establish that the inquiry had been set up mala fide owing to political rivalry. It has been said on behalf of the appellants that there companyld be numberpolitical rivalry because, as appears from Bakshi Ghulam Mohammads own affidavit, he had declared his intention to retire from politics. On behalf of Bakshi Ghulam Mohammad it was stated that G. M. Sadiq had made a statement that he would be released after a Commission of Inquiry was set up and this would show that the detention was mala fide and that would indicate that the Notification had also been issued mala fide. That statement is number before us. On behalf of G. M. Sadiq it was said that such a statement had number been made and what had been said was that he would be released after the companypletion of investigation by the Criminal Investigation Department as thereafter, there will be numberoccasion for Bakshi Ghulam Mohammad to disturb the public peace and safety. It was also said that it had been mentioned that after the companypletion of the investigation, the Commission of Inquiry would be set up. This is number denied. It however does number make the arrest mala fide. It was further said by Bakshi Ghulam Mohammad that the statement showed that the Commission was set up to prevent him from disturbing public safety and law and order and that, therefore, it was outside the scope of the Inquiry Act. This was denied on behalf of G. M. Sadiq. In the absence of the statement, it is impossible for us to say which is the companyrect version. Another point taken was that the affidavits filed on behalf of the appellants showed that the Government were satisfied about the companyrectness of the allegations into which the inquiry was directed. It was companytended that since the inquiry is for finding facts, if the Government were already satisfied about them, there was numberneed for further inquiry. This companytention has numberforce at all. What the affidavit really said was that the Government were prima facie satisfied. They had to be so before they companyld honestly set up the Commission to make the inquiry. It was said on behalf of G. M. Sadiq that before setting up the Commission the Government had investigated into the facts through the Criminal Investigation Department and if the Governments intention was mala fide, they companyld have started criminal proceedings and ruined the political life of Bakshi Ghulam Mohammad just as well thereby and kept him busy and out of politics for a long time. It was pointed out that this might have resulted in serious companysequences for Bakshi Ghulam Mohammad which the Commission of Inquiry would number. It was also pointed out that the Commissioner appointed was a retired Judge of the Supreme Court of India. All this, it was said, would indicate that the action had number been prompted by malice. We cannot say that these companytentions of the appellants have numberforce. The next ground of attack on the Notification was based on Art. 14. It was said that most of the matters into which the Commission had been directed to inquire formed the subject matters of Cabinet decisions. It was pointed out that since such matters are companyfidential and numberone is allowed to divulge in what way the members of the Cabinet voted on them, it must be held that they were all equally responsible for the acts sanctioned. That being so, it was companytended that by picking Bakshi Ghulam Mohammad out of the entire Cabinet for the purpose of the Inquiry the Government had discriminated against him in a hostile way. It was companytended that the Notification must be set aside on that ground. We find this companytention untenable. The inquiry is in respect of wealth acquired by Bakshi Ghulam Mohammad and his friends and relatives by misuse of his official position. It would be strange if all the members of the Cabinet voluntarily abused their office for putting money into the pockets of Bakshi Ghulam Mohammad and his friends. Let us, however, assume that all the members of the Cabinet assisted Bakshi Ghulam Mohammad in doing this. It is however number said that other members had acquired wealth by these acts. He was, therefore, in a class by himself. This classification has further a rational companynection with the setting up of the Commission, for the object is to find out whether the wealth had been acquired by Bakshi Ghulam Mohammad by the abuse of official position. It remains number to deal with the last point. This was directed against the proceedings of the Commission. It was said that the proceedings had been companyducted in a manner companytrary to the rules of natural justice and to statutory provisions. Two specific companyplaints were made. The first was that the Commission had number allowed Bakshi Ghulam Mohammad to inspect all the documents before he was called upon to answer the allegations made against him. The second was that the Commission had refused him permission to cross- examine persons who had filed affidavits supporting the allegations made against him. We have number to set out the procedure followed by the Commission. It first called upon the Government to file affidavits in support of the allegations in the second schedule to the Notification and to produce the documents which supported them. It then asked Bakshi Ghulam Mohammad to file his affidavit in answer. Thereafter the Commission decided whether any prima facie case had been made for Bakshi Ghulam Mohammad to meet and in that process rejected some of the allegations. Bakshi Ghulam Mohammad was told that there was numbercase, which be had to meet in respect of them. Out of the remaining allegations, a group was selected for final companysideration and it was decided that the rest would be taken up gradually thereafter. In companynection with that group of cases, companynsel for Bakshi Ghulam Mohammad wanted to cross-examine all the persons who had filed affidavits supporting the Governments allegations in the cases included in that group. The Commissioner ordered that he would number give permission to cross-examine all the deponents of affidavits but would decide each case separately. It was after this that the petition for the writ was presented. The question of inspection is numberlonger a live question. It is true that when Bakshi Ghulam Mohammad was directed to file his affidavits he had number been given inspection of all the documents and files which the Government proposed to use to support their case. On behalf of Bakshi Ghulam Mohammad it was said that this was a denial of the rules of natural justice. It is number necessary to companysider this question because it is admitted that since then inspection of the entire lot of files and documents has been given. At the final hearing of the allegations, therefore, Bakshi Ghulam Mohammad would numberlonger be at any disadvantage. The next point is as to the right of cross-examination. This claim was first based on the rules of natural justice. It was said that these rules require that Bakshi Ghulam Mohammad should have been given a right to cross-examine all those persons who had sworn affidavits supporting the allegations against him. We are number aware of any such rule of natural justice. No authority has been cited in support of it. Our attention was drawn to Meenglas Tea Estates v. Their Workmen 1 , but there all that was said was that when evidence is given viva voce against a person be must have the opportunity to hear it and to put the witnesses questions in cross-examination. That is number our case. Furthermore, in Meenglas Tea Estate case 1 the Court was number dealing With a fact finding body as we are. Rules of natural justice require that a party against whom an allegation is being inquired into should be given a hearing. Bakshi Ghulam Mohammad was certainly given that It was said that the right to the hearing included a right to cross-examine. We are unable to agree that is so. The right must depend upon the circumstances of each case and must also depend on the statute under which the allegations are being inquired into. This Court has held in Nagendra Nath Bora v. Commissioner of Hills Division and Appeals, Assam 1 that the rules of natural justice vary with the varying companystitution of statutory bodies and the rules prescribed by the Act under which they function and the question whether or number any rules of natural justice had been companytravened, should be decided number under any preconceived numberions, but in the light of the statutory rules and provisions. We have to remember that we are dealing with a statute which permits a Commission of Inquiry to be set up for fact-finding purposes. The report of the Commission has numberforce proportion vigorous. This aspect of the matter is important in deciding the rules of natural justice reasonably applicable in the proceedings of the Commission of Inquiry under the Act. Then we find that s. 10 to which we have earlier referred, gives a right to be heard but only a restricted right of cross-exaniination. The latter right is companyfined only to the witnesses called to depose against the person demanding the right. So the Act did number companytemplate a right of hearing to include a right to crossexamine. It will be natural to think that the statute did number intend that in other cases a party appearing before the Commission should have any further right of cross- examination. We, therefore. think that numbercase has been made out by Bakshi Ghulam Mohammad that the rules of natural justice require that lie should have a right to cross- examine all the persons who had sworn affidavits supporting the allegations made against him. We will number deal with the claim to the right to cross- examine based on statutory provision. That claim is based on s. 4 c of the Act. The relevant part of the section is as follows-- The Commission shall have the power of a Civil Court. while trying a suit under the Code of Civil Proce- 1 1964 2 S.C.R. 165. 2 1958 S.C.R. 1240. dure Svt. 1977, in respect of the following matters, namely- a summoning and ao enforce the attendance yof an person and examining him on oath b c receiving evidence on affidavits It is number in dispute that the Code of Civil Procedure of Jammu and Kashmir State referred to in this section is in the same terms as the Indian Code of Civil Procedure. Order 19 r. I. of the Indian Code reads as follows-- Any Court may at any time for sufficient reason order that any particular fact or facts may be proved by affidavit, or that the affidavit of any witness may be read at the hearing, on such companyditions as the Court thinks reasonable- Provided that where it appears to the Court that either party bona fide desires the production of a witness for cross-examination, and that such witness can be produced, an order shall number be made authorising the evi- dence of such witness to be given by affidavit. The companytention is that the powers of the Commission therefore to order a fact to be proved by affidavit are subject to the proviso that power cannot be exercised when a party desires the production of the persons swearing the affidavits for cross-examining them. The companytention was accepted by the High Court. We take a different view of the matter. We first observe that the inquiry before the Commission is a fact-finding inquiry. Then we numbere that s. 10 which, in our opinion, applies to a person whose companyduct companyes up for inquiry by the Commission directly, has a right to cross-examine only those persons who give viva voce evidence before the Commission against him. If S. 4 c companyferred a right to cross-examine every one who swore an affidavit as to the facts involved in the inquiry, then S. 10 2 would become superfluous. An interpretation producing such a result cannot be right. It also seems to us that O. 19 r. I has to be read with O. 18 r. 4 which states that the evidence of the witnesses in attendance shall be taken orally in open companyrt. It would appear, therefore, that O. 19 r. I. is intended as a sort of exception to the provisions companytained in O. 18 r. 4. The Act companytains numberprovision similar to O. 18 r. 4. Therefore, when S. 4 c of the Act gave the Commission the power of receiving evidence on affidavits, it gave that as an independent power and number by way of an exception to the general rule of taking evidence viva voce in open companyrt. It would be natural in such circumstances to think that what the Act gave was only the power to take evidence by affidavit and did number intend it to be subject to the proviso companytained in O. 19 r. I. If it were number so, then the result really would be to require all evidence before the Commission to be given orally in open companyrt. If that was intended, it would have been expressly provided for in the Act. We should here refer to Khandesh Spinning etc. Co. Ltd. v. Rashtriya Girni Kamgar Sangh 1 where this Court dealing with a somewhat similar section like s. 4 c observed that facts might be proved by an affidavit subject to O. 19 r. 1 . The observations appear to have been obiter dicta. In any case that case was dealing with a statute different from the one before us. The observation there made cannot be of much assistance in interpreting the Jammu and Kashmir Inquiry Act. The number of witnesses swearing affidavits on the side of the Government may often be very large. In fact, in this case the number of witnesses swearing affidavits on the side of the Government is, it appears, in the region of four hundred. The statute companyld number have intended that all of them had to be examined in open companyrt and subjected to cross-examination, for then, the proceedings of the Commission would be interminable. We feel numberdoubt that the Act companytemplated a quick disposal of the business before the Commission, for, otherwise. the object behind it might have been defeated. While on this topic, we would impress upon the Commission the desirability of speedy disposal of the inquiry. For these reasons, in our view, s. 4 c of the Act does number companyfer a right on a party appearing before the Commission to require a witness giving evidence by an affidavit to be produced for his cross-examination. The Commission would, of companyrse, permit cross-examination in a case where it thinks that necessary. The view that we take should number put any party in any difficulty. He can always file affidavits of his own denying the allegations made in affidavits filed on behalf of the other party. If the evidence on both sides is tendered by affidavits, numberone should be at any special disadvantage. We have also to remember that s. 9 of the Act gives the Commission power to regulate its own procedure subject to any rules made under the Act. We find that the rules provide that evidence may be given by affidavits and the Commission may after reading it, if it finds it necessary to do so, record the evidence of the deponents of the affidavits and also of others see ff. 6, 7 and 8. Rule 10 reproduces the restricted right of cross-examination given by s. 10. Rule 11 says that in all matters number provided by the rules, the Commission may decide its own procedure. One of the matters companyered by the rules is cross-examination of witnesses. So the rules companytemplate cross-examination as a matter of procedure and the Commission is free to decide what cross-examination it will allow provided that in doing so it cannot go behind the rules relating to cross-examination. Section 9 of the Act has to be read in the light of these rules. All this. we think, supports 1 1060 2 S.C.R. 841. the interpretation we have put on s. 4 c . We also feel that the procedure before a body like the Commission has necessarily to be flexible. We, therefore, reject the last companytention. In our view, for these reasons, the judgment of the High Court cannot be supported. We accordingly set it aside.

Case appeal was accepted by the Supreme Court

CRIMINAL APPELLATE JURISDICTION- Criminal Appeal No. 113 of 1965. Appeal from the judgment and order dated October 26, 1964 of the Allahabad High Court in Criminal Revision No. 803 of 1963. P. Goyal, for the appellants. P. Rana and Atiqur Rehman, for respondent No.1. K. Mehta and K. L. Mehta, for respondent No., 2. R. L. lyengar and B. R. G. K. Achar, for the Intervener. The Judgment of the Court was delivered by Mudholkar, J. The only point which falls to be decided in this appeal by certificate granted by the High Court at Allahabad is whether the District Judge has jurisdiction under s. 24 of the Code of Civil Procedure to transfer a reference made by a Magistrate to a particular civil companyrt under s. 146 of the Code of Criminal Procedure to another civil companyrt. It arises this way. Proceedings under s. 145, Cr. P.C. were initiated by a Magistrate on the basis of a report of a police officer to the effect that a dispute likely to cause a breach of the peace exists companycerning a plot of land situate within the jurisdiction of the Magistrate between the parties mentioned in the report and praying for appropriate action under S. 145 of the Code of Criminal Procedure. The learned Magistrate upon being satisfied about the possibility of a breach of the peace made a preliminary order under s. 145, Cr. P.C., attached the property to which the dispute related and called upon the parties to adduce evidence in respect of their respective claims. In due companyrse he recorded the evidence but he was unable to make up his mind as to which of the parties was in possession on the date of the preliminary order and within two months thereof. He, therefore, referred the case under s. 146 1 of the Cr. P. C. to a civil companyrt for decision, as to which of the parties was in possession at the material point of time and in the meanwhile directed that the attachment of the Property shall companytinue. The reference went to the companyrt of the Munson within whose territorial jurisdiction the property was situate. But thereafter one of the parties Brij Gopal Binani, respondent No. 2 before us, made an application to the District Judge under S. 24, C.P.C. for transfer of the case to some other. companyrt. The, ground given was that in the execution case out of which proceedings under s. 145, Cr.P.C. had arisen, the same Munsiff had. made an order against him depriving him of companyts. The Munsiff having numberobjection to the transfer the District Judge transferred the case to the companyrt of another Munsiff. The opposite parties, that. is, the appellants before us Ram Chandra Aggarwal and Kedar Prasad Aggarwal acquiesced in the order of transfer and did number raise any question as to the jurisdiction of the, transferee companyrt to-hear and-- decide the reference. Eventually evidence was led by both sides and a finding given by the transferee companyrt. This finding was in favour of the second respondent. After receiving the finding the I Magistrate heard the-parties and held that it was the second respondent who was in possession at the relevant date and passed an order under s. 145 6 , Cr. P.C. pursuant thereto. A revision application was preferred by the appellants before the companyrt of Sessions in which the objection was taken for the first time that the decision of the civil companyrt was a nullity because it had numberterritorial jurisdic- tion over the subject-matter of the dispute. It was further companytended that the District Judge had numberjurisdiction to transfer the case and that companysequently the ultimate order made by the learned Magistrate was a nullity. The learned Additional Sessions Judge who heard the revision application rejected these companytentions on the ground that they were number raised earlier. The appellants then took the matter to the High Court in revision. The appellants rested their revision application on the sole ground that s. 24, C.P.C. was number available in respect of a reference under s. 146 1 Cr. P.C. and that, therefore, the proceedings subsequent to the transfer of the reference from the companyrt of one Munsiff to that of another are a nullity. The High Court permitted the point to be urged. The attack was based upon two grounds- that the reference under s. 146 1 , Cr. P.C. was to a persona designata and that the provisions of s. 24, P.C. were number available with respect to it. The second ground was that the proceeding before the civil companyrt was number a civil proceeding within the meaning of s. 141, C.P.C. The High Court negatived both the grounds on which the companytention was based. On behalf of the appellants Mr. Goyal has reiterated both the companytentions. In fairness to Mr. Goyal it must be said that his attack on the order of the District Judge transferring the case under s. 24, C.P.C. was based more on the ground that the reference under s. 146 1 Cr. P.C. is number a civil proceeding than on the ground that the reference was to a persona designata. However, as he did number wish to abandon the other point we must deal with it even though Mr. R. L. Iyengar who appears for the State companyceded that a reference under s. 146 1 is to a companystituted companyrt and number to a persona designata. In BalakrishnaUdayar v. Vasudeva Aiyar 1 Lord Atkinson has pointed out teh difference between a persona designata and a legal tribunal. The difference is in this that the determinations of a persona designata are number to be treated as judgments of a legal tribunal. In the central Talkies Ltd. v. Dwarka Prasad 2 this Court has accepted the meaning given to the expression persona designata in Osborns Concise Law Dictionary. 4th edn. p. 263 as eta person who is pointed out or described as an individual, as opposed to a person ascertained as a member of a class, or as filling a particular characters Section 146 1 Cr. P.C. empowers a Magis- trate to refer the question as to whether any, and if so, which of the parties was in possession of the subject-matter of dispute at. the relevant point of time to a civil companyrt of companypetent jurisdiction. The power is number to refer the matter to the presiding Judge of a particular civil companyrt but to a companyrt. When a special or local law provides for an adjudication to be made by a companystituted companyrt that is, by a companyrt number created by a special or local law but to an existing companyrt-it in fact enlarges the ordinary jurisdiction of such a companyrt. Thus where a special or local statute refers to a companystituted companyrt as a companyrt and does number refer to the presiding officer of that companyrt the reference cannot be said to be to a persona designata. This question is well settled. It is, therefore, unnecessary to say anything more on this part of the case except that cases dealing with the point have been well summarised in the recent decision in Chatur Mohan v. Ram Behari Dixit. 1 . Now, as to the argument based on the ground that the pro- ceeding before the civil companyrt is number a civil proceeding, Mr. Goyals companytention is that since the proceeding before the criminal companyrt under s. 145 is a criminal proceeding any matter arising out of it, including a reference to a civil companyrt, does number lose its initial character of a criminal proceeding. In support of his companytention he has placed strong reliance upon the observations of Jagdish Sahai J., in Sri Sheonath Prasad v. City Magistrate, Varanasi. 2 In that case the learned Judge was called upon to companysider the meaning of the expression civil companyrt of companypetent jurisdiction occurring in s. 146 1 of the Code of Criminal Procedure. It was companytended before him that the companypetency of the companyrt is to be determined number merely with respect to the territorial jurisdiction of the companyrt but also with respect to its pecuniary jurisdiction. The question arose because it was companytended before him that the finding on a question of possession was recorded by a civil companyrt which though it had territorial jurisdiction over the subject matter of the dispute the value of the subject matter was in excess of the pecuniary jurisdiction of the companyrt. In the companyrse of his judgment the learned Judge has observed- that a proceeding even on reference made to a civil companyrt retains its old moorings and does number change its character from a criminal proceeding to a civil proceeding and does number become a proceeding in the suit. Then he went on to point out that the criminal companyrt still retains its jurisdiction because it companyld withdraw the reference from the civil companyrt at any. time and also because the ultimate decision with the respect to the dispute between the parties was to be made by the Magistrate and number by the civil companyrt. All this, according to the learned Judge, would show that the proceeding even- before the civil companyrt would number be a civil proceeding.and the idea of pecuniary jurisdiction of a companyrt being foreign to the Code of Criminal Procedure it was number necessary to 1 1964 All. L. J. 256. 2 - A.I.R. 1959-All. 467. ascertain whether the companyrt to which a reference was made under s. 146 1 Cr. P.C. had pecuniary jurisdiction over the subject matter of the dispute or number. This decision ignores the vast body of authority which is to the effect that when a legal right- is in dispute and the ordinary companyrts of the companyntry are seized of such dispute the companyrts are governed by the ordinary rules of procedure applicable to them. Two of the decisions are Adaikappa Chettiar v. Chandrasekharca Theyar 1 and Maung Ba Thaw v. Ma Pin 1 and also a decision of this Court which proceeds upon the same view. Thus in South Asia Industries P Ltd. v. S. B. Sarup Singh 1 it was held that where a statute companyfers a right of appeal from the order of a tribunal to the High Court without any limitation thereon the appeal to the High Court will be regulated by the practice and procedure obtaining in the High Court. We would also like to refer to the decision of this Court in Naravan Row v. Ishwarlal 1 in which it was held that there is numberreason for restricting the expression civil proceeding only to those proceedings which arise out of civil suits or proceedings which are tried as civil suits. Though this decision was companycerned with the meaning of the words civil proceeding used in Art. 133 1 c of the Constitution the reasoning behind it sufficiently repels the extreme companytention of Mr., Goyal that a proceeding stemming from a criminal matter must always bear the stamp of a criminal proceeding. Then, according to Mr. Goyal, when a magistrate refers a question as to which- party was in possession at the relevant date what be does is to delegate that duty, initially resting upon him, to the civil companyrt. In performing that duty the civil companyrt would, therefore, be acting as a criminal companyrt just as the magistrate would be doing where he has to decide the question himself. The two Privy Council decisions we have referred to sufficiently answer this companytention. No doubt, the Magistrate, while discharging his function under the Code of Criminal Procedure under s. 145 1 , would be exercising his criminal jurisdiction because that is the only kind of jurisdiction which the Code companyfers upon the magistrates but when the magistrate refers the question to a civil companyrt he does number companyfer a part of his criminal jurisdiction upon the civil companyrt. There is numberprovision under which he can clothe a. companyrt or a tribunal which is number specified in the Criminal Procedure Code with criminal jurisdiction We are, therefore, unable to accept the companytention of Goyal. Mr. Iyengar tried to put the matter in a somewhat different way. In the first place. according to him- , if we hold that the proceeding before the civil companyrt is a, civil proceeding then all the rules of procedure companytained in the Civil Procedure Code,. including those relating to appeals or revision would apply to the proceeding. This. 1 74 I.A. 264. 2 61 I.A. 158. 3 1966.2 S.C.R. 756. A.I.R. 1956 S.C.1818 he points out, would be companytrary to the provisions of s. 146 1-P of Code of Criminal Procedure which bar an appeal,review or revision from any finding of the civil companyrt. From this he wants us to infer that the proceeding does number take the character of a civil proceeding even though it takes place before a civil companyrt. We are number, impressed by this argument. If sub-s. 1-D had-, number been enacted and this is really a new provision an appeal or revision application would have been maintainable. Now that it is there, the only effect of it is that neither an appeal number a revision is any longer maintainable. This companysequence ensues because of the express provision and number because the proceeding, before the civil companyrt is number a civil proceeding. The next companytention-and it was the one pressed strenuously by him-was that a proceeding upon a reference under s. 146 1 entertained by a civil companyrt number being an original proceeding the provisions of s. 141, C.P.C. are number attracted and that, therefore. those provisions of the Civil Procedure Code which relate to suits are number applicable to a proceeding undertaken by a civil companyrt upon a reference to it under s. 146 1 of the Code of Criminal Procedure. A number of cases dealing with this point were brought to our numberice either by him or by Mr. Goyal. It seems to us, however, that those cases are number relevant for deciding the point which is before us. In passing, however, we may mention the fact that a full bench of the Allahabad High Court has held in Maha Ram v. Harbans 1 that the civil companyrt to which an issue on the quest-ion of proprietary rights has been submitted by a revenue companyrt under S. 271 of the Agra Tenancy Act, 1926 has jurisdiction to refer,the issue to arbitration under paragraph I of Schedule II of the P C. This decision is based upon the view that by virtue of S. 141, C.P.C. the provisions relating to arbitration companytained in the second schedule to the Code of Civil Procedure before the repeal of that schedule applied to a proceeding of this kind. Similarly recently this Court has held in Munshi Ram v. Banwarilal 2 that- under s. 41 of the Arbitration Act and also under s. 141, C.P.C. it was companypetent to the companyrt before which an award made by an arbitration tribunal is filed for passing a decree in terms thereof to-permit Parties to companypromise their dispute under XXIII, r. 3, C.P.C. Though there is numberdiscussion, this Court has acted upon the view that the expressioncivil proceeding in s. 141 is number necessarily companyfined to an original proceeding like a suit or an application for appointment of a gurdian etc. but that it applies also to a proceeding which is number an original proceeding. Thus, though we say that it is number an original to companysider in this case whether. the proceeding before the civil companyrt is a civil proceeding as companytemplated by s. 141 or number there is good authority for saying that it is a civil Proceeding. All that we are companycerned with in this case is whether I.L.R. 1941 All.193 I.L.R. 1962 S.C.903. the provisions. of s. 24 1 b of the Code of Civil Procedure are available with respect to a proceeding arising out of a reference ,,under s. 146 1 , Cr. P.C. The relevant portion of s. 24 may, therefore be set out. It reads thus- On the application of any of the parties and after numberice to the parties and after hearing such of them as desired to be heard, or of its own motion without such numberice, the High Court or the District Court may at any stage- a b withdraw any suit, appeal or other proceeding pending in any Court subordinate to it, and transfer the same for trial or disposal to any Court subordinate to it and companypetent to try or dispose of the same or III It plainly speaks of other proceeding pending in any companyrt subordinate to it and number only to the civil proceeding pending before a subordinate companyrt. The decisions of the Privy Council and one decision of this Court which we have earlier quoted would warrant the application of the provisions of the Code of Civil Procedure generally to a proceeding before a civil companyrt arising out of a reference to it by a Magistrate under s. 146 1 of the Code of Crimi- nal Procedure. The expression proceeding used in this section is number a term of art which has acquired a definite meaning. What its meaning is when it occurs in a particular statute or a provision of a statute will have to be ascertained by looking at the relevant statute. Looking to the companytext in which the word has been used in s. 24 1 b of the Code of Civil Procedure it would appear to us to be something going on in a companyrt in relation to the adjudication of a dispute other than a suit or an appeal. Bearing in mind that the term proceeding indicates something in which business. is companyducted according to a prescribed mode it would be only right to give it, as used in the aforesaid provision, a companyprehensive meaning so as to include within it all matters companying up for judicial adjudication and number to companyfine it to a civil proceeding alone. In a recent case Kochadai Naidu v. Nagavasami Naidu 1 Ramachandra lyer J., as he then was was called upon to companysider the very question which arises before us. The learned Judge held I.L.R. 1961 Mad. 413. that a proceeding before a civil companyrt arising out of a reference to it under S. 146 1 , Cr. P.C. can be transferred by the High Court or District Court under S. 24, P.C. because it is in any case a proceedings. He has also companysidered this question from the angle of the nature of the proceeding and expressed the view that the proceeding was a civil proceeding to which the procedure for suits companyld, with the aid of s. 141, C.P.C. be applied. If indeed the term proceeding in s. 24 is number companyfined to a civil proceeding there is numberneed whatsoever of taking the aid of S. 141, C.P.C.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION - Criminal Appeal No, 110 of 1966. Appeal by special leave from the judgment and order dated February 8, 1966 of the Calcutta High Court in Criminal Case No. 266 of 1965. C. Chatterjee, S. K. Dutta and D. N. Mukherjee, for the appellant. K. Daphtary, Attorney-General, B. Sen, P. K. Chatterjes and P. K. Bose, for the respondents. The Judgment of the Court was delivered by Ramaswami, J. This appeal is brought, by special leave, against the judgment of the Calcutta High Court dated February 8. 1966 in Criminal Misc. Case No. 266 of 1965 refusing to grant a writ in the nature of habeas companypus ordering the release of the appellant, Jaichand Lal Sethia from detention under an order passed by the Government of West Bengal under r, 30 of the Defence of India Rules. After the companyclusion of arguments in this case on May 3. 1966 we expressed the view that this appeal should be dismissed and the reasons will be stated later. We number proceed to express those reasons. The case of the appellant is that he was carrying on business of purchasing and selling goods like cloves, cinnamon, dye-stuff etc. in the city of Calcutta. In the month of January, 1963 the appellant had some trouble with the police of Burrabazar, P.S. in Calcutta, particularly with the Sub-Inspector Kalyan Dutt. Officer-in-charge of that Police Station The appellant also said that he incurred the displeasure of the officers of the Customs De- partment who had illegally seized the goods of the appellant and also prevented him from participating at the auction- sales of Customs Department. The appellant had made a companyplaint to the higher authorities of the Customs Department in this respect. On September 27, 1965 the order of detention of the appellant was made by the Government of West Bengal under r. 30 of the Defence of India Rules and in pursuance of that order the appellant was detained in the Presidency jail at Calcutta. The order of detention being No. 7422 H.S. of the Government of West Bengal Home Department Special Section reads as follows- Whereas the Governor is satisfied that with a view to preventing Sri Jaichand Lal Sethia, son of Sri Dipchand Sethia of 9 Decres Lane, Calcutta from acting in any manner prejudicial to the maintenance of Public Order, it is necessary to make an order directing that he be detained. Now, therefore. the Governor in exercise of the power companyferred by Rule 30 of the Defence of India Rules, 1962, is pleased hereby to direct that the said person be detained and be kept in custody in the Presidency Jail during the period of such detention. The appellant obtained a rule from the Calcutta High Court asking the respondents to show cause why a writ in the nature of habeas companypus should number be granted directing the release of the appellant from detention. The case of the appellant was that the order of detention was made mala fide because the appellant had incurred the personal hostility of some officers in the police and Customs Departments. It was companytended that the order of detention was procured mala fide upon false reports made vindictively under the Defence of India Rules by the officers in the police and Customs Departments. It was said that the order was made by the Chief Minister, West Bengal number because he was satisfied about the necessity of detaining him in the interest of public order but for ulterior companysiderations. In response to the numberice an affidavit was filed on behalf of the State of West Bengal denying the allegations of the appellant. Affidavits were also filed by Kalyan Dutt and Debranjan Dutta companytroverting the allegations of the appellant so far as they were companycerned., After hearing the parties, the Calcutta High Court hold that the order of detention was lawfully made by the Chief Minister of West Bengal and the allegation of mala fide had number been established by the appellant. The High Court accordingly dismissed the application of the appellant for grant of a writ of habeas companypus. On behalf of the appellant it was submitted by Mr. N. C. Chatterji that the order of detention was made on the basis of re. ports submitted by the police and Customs authorities whose enmity had been incurred by the appellant. It was pointed out that on August 16, 1964 the appellant had sent a representation to the Chief Minister of West Bengal and other higher authorities saying that the police had been creating fictitious records for putting the appellant under detention under the Defence of India Rules. In July, 1965 three defamation cases were started against the appellant at the instance of the Customs officers. In August and September, 1965 the appellant had sent representations against the police and Customs officers to the Chief Minister, West Bengal and other higher authorities. The companytention of the appellant is that the order of detention was made on September 27,1965 by the Chief Minister, West Bengal number because of any material suggesting that the appellant was acting, in any manner, prejudicial to the maintenance of public order but because of the false reports made by the police and Customs officers. The next companytention of the appellant is that there is numberaffidavit filed on behalf of the Chief Minister, West Bengal showing that he applied his mind to the case of the appellant and that he had the requisite satisfaction as required by the statutory rule. It was also submitted that the High Court did number permit the appellant to inspect the material on the basis of which the order of detention was made and the High Court companymitted an error of law in number permitting the appellant to go beyond the authenticated order of detention and to find out whether the satisfaction of the Chief Minister, West Bengal was based upon sufficient material. Before proceeding to deal with these points raised on behalf of the appellant it is necessary to state that in Makhan Singh Tarsikka v. The State of Punjab 1 and in Durgadas Shirali v. The Union of India and Anr. 2 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 Presidentone 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 scope 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 Presidential Order the validity of the Ordinance or any rule or order made thereunder cannot be questioned on the ground that it companytravenes 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 appellant 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 the appellant to challenge the Order 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. 19 are automatically suspended. But the appellant can challenge the validity of the order 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 - 1964 4 S.C.R. 932. 2 1966 2 S.C.R. 573. purview of the Presidential Order. For instance, a citizen will number be deprived of the 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 may be stated in this companytext that a mala fide exercise of power does number necessarily imply any moral turpitude as a matter of law. It only means that the statutory power is exercised for purposes foreign to those for which it is in law intended. In other words, the power companyfer-red by the statute has been utilised for some indirect purpose number companynected with the object of the statute or the mischief, it seeks to remedy. It is companytended in the first place,on behalf of the appellant that the order of detention is bad because the Chief Minister had taken into account the reports from the police and Customs officers falsely made against the appellant. It is argued by Mr. N. C Chatterji that the order of detention is bad because the statutory power has been exercised mala fide that is to say, it has been utilised for some indirect purpose number companynected with the object of the statute or the mischief which it seeks to remedy. The allegation of the appellant has been denied by Mr. Sen Gupta, Deputy Secretary to the West Bengal Government, Home Department in his affidavit made on behalf of the Government of West Bengal It is stated by Mr. Sen Gupta that in making the order of detention dated September 27, 1965 the Chief Minister, West Bengal did number take into companysideration the criminal proceedings pending against the appellant before the Police and Customs authorities. Mr. Sen Gupta further said that all papers available to State Government as to the activities of the appellant Jaichand Lal Sethia were placed before the Chief Minister who was personally satisfied that the appellant was engaged in illegal activities prejudicial to the maintenance of public order and as such an order of detention of the appellant was necessary. It was also stated by Mr. Sen Gupta in his affidavit that the appellant was engaged number only as a dealer in spices but was engaged in procuring and selling goods illegally and clandestinely., The allegation of the appellant has also been denied by Kalyan Dutt in his affidavit. Mr. Kalyan Dutt states that he never created fictitious records against the appellant and never prepared or forwarded any history-sheet or any numbere to any authority recommending the detention of the appellant under the Defence of India Rules. There is also an affidavit by Mr. Debaranjan Dutta denying the allegations made by the appellant. On perusal of the various affidavits filed in the case the High Court reached the companyclusion that the allegation of mala fide made by the appellant had number been substantiated and the order of detention made by the Government of West Bengal companyld number be held to be legally invalid on this account. We see numberreason to take a view different from that of the High Court on this point. We are accordingly of the opinion that Mr. N. C. Chatterji on behalf of the appellant is unable to make good his submission on this aspect of the case. It was next companytended on behalf of the appellant that the High Court should have called upon the State Government to produce the file companycerning detention of the appellant in order to determine for itself whether the Chief Minister had sufficient material before him for satisfying himself as to the necessity for the detention of the appellant. We are unable to accept this argument as companyrect. The satisfaction of the Government which justifies the order of detention under r. 30 is a subjective satisfaction. A companyrt cannot numbermally enquire whether grounds existed which would have created that satisfaction on which alone the order companyld have been made in the mind of a reasonable person. If therefore an authenticated order of detention is on its face regular and in companyformity with the language of r. 30 it is number ordinarily open to a companyrt to enter into an investigation about the sufficiency of the material on which the order of detention is based. The legal position has been explained by the Judicial Committee in King Emperor v. Shibnath Banerjee 1 as follows- It is quite a different thing to question the accuracy of a recital companytained in a duly authenticated order, particularly w here the recital purports to state as a fact the carrying out of what I regard as a companydition necessary to the valid making of that order. In the numbermal case the existence of such oh recital in a duly authenticated order will, in the absence of any evidence as to its inaccuracy, be accepted by a companyrt as establishing that the necessary companydition was fulfilled. The presence of the recital in the order will place a difficult burden on the detenu to produce admissible evidence sufficient to establish even a prima faciea case that the recital is number accurate. Reference may be made, in this companynection, to Liversidge V. Sir John Anderson 2 and Greene v. Secretary of State for Home Affairs 3 . The question in those cases was whether the Home Secretary had reasonable cause to believe that certain persons were of hostile associations and that by reason thereof it was necessary to exercise companytrol over them. It was held that the matter was one for the executive discretion of the Secretary of State, and that the Court was number entitled to investigate the grounds on which the Secretary of State came to believe the persons companycerned to be of 1 72 I.A. 241 at p. 261. 3 1942 A.C. 284. 2 1942 A.0. 206. hostile associations, or to believe that by reason of such associations it was necessary to exercise companytrol over them. In Liversidges 4 case Viscount Maugham observed as follows- In my opinion, the well-known presumption omnia esse rite acta applies to this order, and, accordingly, assuming the order to be proved or admitted, it must be taken prtma facie, that is until the companytrary is proved, to have been properly made and that the requisite as to the belief of the Secretary of State was companyplied with. In Greenes 2 case Viscount Maughan again quoted with ap- proval the following passage from the judgment of Goddard J. in the Court of Appeal- I am of opinion that where on the return an order or warrant which is valid on its face is produced it is for the prisoner to prove the facts necessary to companytrovert it, and in the present case this has number been done. I do number say that in numbercase is it necessary for the Secretary of State to file an affidavit. It must depend on the ground on which the return is companytroverted, but where all that the prisoner says in effect is I do number know why I am interned. I deny that I have done anything wrong, that does number require an answer because it in numberway shows that the Secretary of State had number reasonable cause to believe, or did number believe, otherwise. It is manifest that an order of detention under r. 30 of the Defence of India Rules can only be passed if the State Government is satisfied that the detention of a particular person is necessary on any ground referred to in that Rule. Even though the order as drawn up recites that the State Government was satisfied, the accuracy of that recital can be challenged in companyrt to a limited extent. The accuracy can be challenged in two ways either by proving that the State Government never applied its mind to the matter or that the authorities of the State Government acted mala fide. In a numbermal case the existence of such a recital in a duly authenticated order will, in the absence of any evidence as to its inaccuracy, be accepted by the companyrt as establishing that the necessary companydition was fulfilled. In other words, in a numbermal case the existence of such a, recital in a duly authenticated order that the State Government was satisfied will, in the absence of any evidence to the companytrary, be accepted by the companyrt as establishing that the State Government was so satisfied. If the order of detention itself suffers from any lacuna it is open to a companyrt to call for an affidavit from the Chief Minister or other Minister companycerned or to call for the relevant file from the State Government in order to 1 1942 A.C. 286. 2 1942 A.C.284. satisfy itself as to the accuracy of the recital made in the order of detention. For instance, in Biren Dutta etc. v. Chief Commissioner of Tripura this Court made an order directing the Chief Secretary to the Tripura Administration to transmit to this Court the original files in respect of the detenus and also directed the Minister companycerned or the Secretary or the Administrator to file an affidavit in this Court stating all the material facts indicating whether the decision arrived at was duly companymunicated to the detenus companycerned. But the order for production of the file and for affidavit from the Minister or the Secretary companycerned was made in that case because the appellant alleged that the order of review had number been reduced to writing under r. 30A 8 and the relevant companyditions prescribed by the rule had number been companyplied with and that it had number been companymunicated to him. Reference was made by Mr. N. C. Chatterji to another case-Jagannath Misra The State of Orissa 1 -in which this Court ordered the Home Minister to file an affidavit. In that case the order of detention was defective because the authenticated companyy of the order mentioned six grounds with the disjunctive or mentioned in the affidavit of the Chief Secretary. Some of these grounds were followed by etc In view of the ambiguity of the order this Court made a direction asking the State Government to produce the original order which was in the form of a document and also called for an affidavit from the Home Minister who was in-charge of matters of detention. In the present case, the material facts are different from those in the Jagannath Misra 1 case, in the Biren Dutta 1 case. It follows therefore that the High Court was justified in number making an order for discovery or production of the original departmental file companytaining the activities of the appellant by the Government of West Bengal. Lastly it was companytended for the appellant that the High Court should have asked the Chief Minister to file an affidavit and rejected the affidavit filed by the Deputy Secretary Mr. Sen Gupta as insufficient to companytrovert the allegations of the appellant. We do number think there is any substance in this point. There is numberallegation made by the appellant that the Chief Minister himselfwas acting mala fide. The allegation of the appellant was thatMr.Kalyan Dutt and the Customs Officers had acted malafide against the appellant. The allegation of the appellant onthis point has been denied by Mr. Kalyan Dutt in his affidavit.As there is numberallegation of mala fides or lack of bona fideswith regard to the Chief Minister of West Bengal who is the authority for deciding as to the necessity for detention of the appellant it 1 1964 8 S.C.R. 295. 2 1966 3 S.C.R. 134. was number necessary for the High Court to call for an affidavit from the Chief Minister and the affidavit filed by Mr. Sen Gupta on behalf of the Government of West Bengal was rightly companysidered by the High Court as sufficient in the circumstances of the case.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeals Nos. 130 131 of 1964. Appeals by special leave from the Judgment and order dated December 3, 1963 of the Madras High Court in Criminal Appeals Nos. 380 of 1961 and 72 of 1962 respectively. Sup.C.I./66-14 Ganapathy Iyer, for the appellant in both the appeals . V. Rangam, for the respondent in both the appeals . The Judgment of the Court was delivered by Ramaswami, J. Criminal Appeal No. 130 of 1964 This appeal is brought, by special leave, from the judgment of the Madras High Court dated December 3, 1963 in Criminal Appeal No. 380 of 1961 by which the appellant was companyvicted under s. 409, Indian Penal Code and sentenced to rigorous imprisonment for one year. The appellant was elected President of the Nerinjipet Panchayat Board on May 17, 1958. At that time he was a duly elected member of the Board. It appears that a sum of Rs. 4,000 of the Board had been invested in four National Plan Savings Certificates in the Bhavani Post Office. It was alleged that the appellant cashed them on February 11, 1959 and did number bring the amount in the account books of the Panchayat Board. The defence of the appellant was that he signed the certificates and handed them over to P.W. 4, the Deputy Panchayat Officer of the block within which the village was located. This was done by the appellant because W. 4 approached him and asked him that the Board should subscribe through him for small savings certificates for Rs. 7,000 just as the Panchayat had subscribed Rs. 7,000 through Tass liar representing the Revenue Department. For that purpose P.W. 4 got Rs. 500 in cash on December 2, 1958 and a cheque for Rs. 2,500 on February 9, 1959. It was the -case of the appellant that P.W. 4 represented that along with this SUM of Rs. 3,000 he would cash the National Plan Savings Certificates of the total value of Rs. 4,000 and purchase small savings ,certificates for Rs. 7,000 that being his quota from the Narinjipet Panchayat. To enable W. 4 to make the purchase, the appellant endorsed the National Plan Savings Certificates and handed them over to W. 4. The Sub-Divisional Magistrate, Erode was number satisfied that the prosecution had proved the charge and therefore acquitted the appellant, but on appeal the High Court accepted the prosecution evidence that it was the appellant who ,cashed the certificates at the Post Office and number P.W. 4 and accordingly found the appellant guilty of the offence. It was argued on behalf of the appellant in the High Court that prosecution was number maintainable for want of sanction by the State Government under s. 106 of the Madras Village 2 03 Panchayats Act Madras Act X of 1950 hereinafter called the Madras Act . That section reads as follows When the president, executive authority or any member, is accused of any offence alleged to have been companymitted by him while acting or purporting to act in the discharge of his official duty, numberCourt shall take companynizance of such offence except with the previous sanction of the Government. Sanction for the prosecution was, however, given in this case by the Collector and number by the Government under powers purported to have been delegated to him under s. 127 of the Madras Act which provides 127. 1 The Government may, by numberification, authorize any authority, officer or person to exercise in any local area, in regard to any panchayat or any class of panchayats or all pancbayats in that area, any of the powers vested in them by this Act except the power to make rules and may in like manner withdraw such authority. The High Court held that numbersanction of the Government was necessary as the appellant had ceased to hold the office of President when the prosecution was launched and further that the sanction of the Collector was sufficient in law. The question of law involved in this appeal is whether the sanction of the Government under S. 106 of the Madras Act is necessary for the prosecution of the appellant for the offence under s. 409, Indian Penal Code. On behalf of the appellant it was companytended that the sanction granted by the Collector was number valid in law and sanction should have been given under s. 106 of the Madras Act by the State Government. It was submitted that s. 127 1 of the Madras Act has number authorised the Government to delegate the power for granting sanction under S. 106, to the Collector, and that what was delegated was the power of the State Government in respect of any panchayat or any class of panchayats or all panchayats in any local area, but the power under S. 106 that companyld be exercised was only a power in regard to the President or any member of the panchayat. It was therefore submitted that the Government did number delegate its powers under S. 106 of the Madras Act by virtue of the authority companyferred under S. 127 1 . It is number necessary for us to express any companycluded opinion on the argument put forward by the appellant, for we companysider that numbersanction of the Government under s. 106 of the Madras Act is necessary for the prosecution of the appellant on the charge under s. 409, Indian Penal Code, and the companyviction of the appellant on that charge is number invalid on this account. Hori Rain Singh v. Emperor 1 was a decision of the Federal Court on the necessity for sanction under s. 270 of the Government of India Act, 1935, which is similar to s. 197 1 of the Code of Criminal Procedure and S. 106 of the Madras Act. The facts in that case were that a Sub-Assistant Surgeon was charged under s. 409 with having dishonestly removed certain medicines from a hospital which was under his charge, to his own residence, and under s. 477-A, with having failed to enter them in the stock book. The sanction of the Government had number been obtained for the prosecution under s. 270 of the Government of India Act. The question for decision in that case was whether such sanction was necessary. It was held by the Federal Court that the charge under s. 477-A required sanction, as the official capacity is involved in the very act companyplained of as amounting to a crime but that numbersanction was required for a charge under s. 409, because the official capacity is material only in companynection with the entrustment and does number necessarily enter into the later act of misappropriation or companyversion, which is the act companyplained of. In Gill v. The King 2 the question arose directly with reference to s. 197 i of the Criminal Procedure Code. In that case the accused was charged under S. 161 with taking bribes, and under s. 120-B with companyspiracy. On the question whether sanction was necessary under s. 197 1 it was held by the Judicial -Committee that there was numberdifference in scope between that sanction and section 270 of the Government of India Act, 1935, and approving the statement of the law by Varadachariar, J. in Hori Ram Singh v. Emperor 1 Lord Simonds observed in the companyrse of his judgment at page 40 of the Report In the companysideration of s. 197 much assistance is to be derived from the judgment of the Federal Court in Hori Ram Singh v. The Crown 1939 F.C.R. 159, and in particular from the careful analysis of previous authorities which is to be found in the opinion of Varadachariar, J. Their Lordships, while admitting the companyency of the argument that in the circumstances prevailing in India a large measure of protection from harassing proceedings may be necessary for public officials, cannot accede to the view that the relevant words have the scope that has in some cases been given to them. A public servant can only be said to act or to purport to act in the discharge of his official duty, if his act is such as to lie within the scope of his official duty. Thus a judge neither acts number purports to act as a judge in receiving a bribe, though the judgment which he delivers may be such an act number does a Government medical officer act or purport to act as a public servant in picking the pocket of a patient whom he is examining, 1 1939 F. C. R. 159. 2 1948 F. R. 19. 20 5 though the examination itself may be such an act. The test may well be whether the public servant, if challenged, can reasonably claim that, what he does, he does in virtue of his office. Applying such a test to the present case, it seems clear that Gill companyld number justify the acts in respect of which he was charged as acts done by him by virtue of the office that he held. Without further examination of the authorities their Lordships, finding themselves in general agreement with the opinion of the Federal Court in the case cited, think it sufficient to say that in their opinion numbersanction under s. 197 of the Code of Criminal Procedure was needed. The view expressed by the Judicial Committee in Gill v. The King 1 was followed by the Judicial Committee in the later cases Albert West Meads v. The King 2 and Phanindra Chandra v. The King 3 and has been approved by this Court in R. W. Mathams v. State of west Bengal 4 . It is number therefore every offence companymitted by a public servant that requires sanction for prosecution under s. 197 1 of the Criminal Procedure Code number even every act done by him while he is actually engaged in the performance of his official duties but if the act companyplained of is directly companycerned with his official duties so that, if questioned, it companyld be claimed to have been done by virtue of the office, then sanction would be necessary. It is the quality of the act that is important and if it falls within the scope and range of his official duties the protection companytemplated by s. 197 of the Criminal Procedure Code will be attracted. An offence may be entirely unconnected with the official duty as such or it may be companymitted within the scope of the official duty. Where it is unconnected with the official duty there can be numberprotection. It is only when it is either within the scope of the official duty or in excess of it that the protection is claimable. The same principle has been expressed by this Court in Om Prakash Gupta v. State of U.P. 5 in which it was pointed out that sanction to the prosecution of a public servant under S. 409 of the Indian Penal Code is number necessary since the public servant is number acting in his official capacity in companymitting criminal breach of trust. In a later case--Satwant Singh v. The State of Punjab 6 , it was held that if a public servant companymits the offence of cheating or abets another so to cheat, the offence companymitted by him is number one while he is acting or purporting to act in the discharge of his official duty. The same view his been taken by this Court in a later decision-Baijnath Gupta and Ors. v. The State of Madhya Pradesh 7 , and it was held that the sanction of the State Government was number necessary for the prosecution of 1 1948 F.C.R. 19. 2 75 I.A. 185. 3 76 I.A. 10. 4 1955 1 S.C.R. 216. 5 1957 S.C.R. 423. 6 1960 2 S.C.R. 89. 7 1966 1 S.C.R. 210. 20 6 the appellant under s. 409 of the Indian Penal Code because the act of criminal misappropriation was number companymitted by the appellant while he was acting or purporting to act in discharge of his official duties and that offence had numberdirect companynection with the duties of the appellant as a public servant, and the official status of the appellant only furnished the appellant with an occasion or an oppor- tunity of companymitting the offence. Section 106 of the Madras Act is similar in language to s. 197 of the Criminal Procedure Code and for the reasons already expressed we are of the opinion that the sanction of the State Government was number necessary for prosecution of the appellant under S. 409, Indian Penal Code. We accordingly reject the argument of learned Counsel for the appellant on this aspect of the case and dismiss this appeal. Criminal Appeal No. 131 of 1964 This appeal is brought, by special leave, from the judgment of the Madras High Court dated December 3, 1963 in Criminal Appeal No. 72 of 1962 companyvicting the appellant of the offence under s. 409, Indian Penal Code and sentencing him to rigorous imprisonment for 6 months. The question of law involved in this appeal is the same as in Criminal Appeal No. 130 of 1964 and for the reasons given in that case we hold that the sanction of the Government is number necessary for prosecution of the appellant under s. 409, Indian Penal Code and the companyviction of the appellant on that charge is number defective in law,. This appeal also must be dismissed.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 939 of 1963. Appeal from the judgment and decree dated March 28, 1958 of the Patna High Court in Appeal from Original Decree No. 458 of 1951. Sarjoo Prasad, Indu Shekhar Prasad Sinha, B. P. Singh. Anil Kumar Sablok and U. P. Singh, for the appellant. C. Chatterjee and D. Goburdhun, or respondents Nos.1 and 2. B. Datar, Vineet Kumar and K. R. Chaudhury, for the respondent No. 9. The Judgment of the Court was delivered by Shah, J. Musamat Chando Kuer, widow of Babuji, instituted a suit on April 23, 1949 in the Court of the Sabordinate Judge, Darbhanga, against the companylaterals of her husband for a decree for partition and separate possession of a half share in the properties described in Schedules A to E and a fourth share in Sch. F annexed to the plaint. It was the case of Chando Kuer that her husband Babuji separated in 1934 from the companyarcenary of which he was a member, and on his death on October 28, 1937 his share in the family property devolved upon her, but the defendants failed and neglected to divide the estate and deliver to her the share inherited by her. The suit was resisted by the companylaterals of Babuji. Chando Kuer died on March 9, 1951, and her daughters Subujpari and Sujan Devi hereinafter companylectively called the appellants were brought on the record of the suit as her heirs and legal representatives. Being of the opinion that the plea of separation of Babuji from the companyarcenary in 1934 was number established, and that the interest of Babuji in the companyercenary property devolved upon the surviving companyarceners, the Trial Court dismissed the suit. In appeal, the High Court of Judicature at Patna, granted a decree for possession of a share in the property as at the date of the suit. The held that on the death of Babuji on October 28, 1937, Chando Kuer by virtue of the Hindu Womens Rights to Property Act, IS of 1937, acquired in the property of the companyarcenary the same interest which Babuji had, and by the institution of the suit for partition that interest became defined, and oil her death it devolved upon the appellants as heirs to the estate of Babuji. With certificate granted by the High Court, Satrughan the son of Ghiran has appealed to this Court. Under the Mitakshara school of Hindu law, on the death of a companyarcener his individual interest in the companyarcenary property devolves by survivorship upon the remaining companyarceners, and his widow if any is entitled to maintenance only out of the property. But the Parliament enacted Act 18 of 1937 which sought to invest the widow in a family governed by the Mitakshara law with the same interest which her husband had in the family estate at the time of his death, and also with the right to obtain by partition separate possession other interest. Section 3 of Act 18 of 1937 as amended by Act 1 1 of 1938 insofar as it is material in this appeal is 3. 1 When a Hindu governed by any school of Hindu law other than the Dayabhaga school or by customary law dies having at the time of his death an interest in a Hindu joint family property, his widow shall, subject to the provisions of subsection 3 , have the same interest as he himself had. Any interest devolving on a Hindu widow under the provisions of this section shall be the limited M14Sup. CI/66---2 interest known as a Hindu Womans estate, pro- vided however that she shall have the same right of claiming partition as a male owner. 4 This Act did number operate to regulate succession to agricultural lands in the Provinces,but the Province of Bihar enacted Act VI of 1942 extending the operation of Act 18 of 1937 to agricultural lands in Bihar with retrospective effect from April 14, 1937. The Act seeks to make fundamental changes in the companycept of a companyarcenary and the rights of members of the family in companyarcenary property. The Hindu law, as laboriously developed by the Anglo-Indian Courts in the light of certain basic companycepts expounded by the ancient law givers, had acquired a degree of companysistency and symmetry. The Act in investing the widow of a member of a companyarcenary with the interest which the member had at the time of his death has introduced changes which are alien to the structure of a companyarcenary. The interest of the widow arises number by inheritance number by survivorship, but by statutory substitution Lakshmi Perumallu v. Krishnavenamma 1 . Her interest in the property is the limited interest known as a Hindu womans estate but the Act gives her the same power to claim partition as a male owner has. The Act is however silent about the mode of devolution of the property obtained on partition, on termination of her estate, about the rights of the surviving companyarceners qua the interest vested in the widow, about the rights of the widow qua the interest of the surviving companyarceners, and about several other matters. To resolve the problem raised before us, we may in the first instance refer to the principal characteristics of a Hindu companyarcenary and of the limited estate held by Hindu females known as a Hindu womans estate. A Hindu companyarcenary under the Mitakshara school companysists of males alone it includes only those members who acquire by birth or adoption interest in the companyarcenary property. The essence of companyarcenary property is unity of ownership which is vested in the whole body of companyarceners. While it remains joint, numberindividual member can predicate of the undivided property that he has a definite share therein. The interest of each companyarcener is fluctuating, capable of being enlarged by deaths, and liable to be diminished by the birth of sons to companyarceners it is only on partition that the companyarcener can claim that he has become entitled to a definite share. The two principal incidents of companyarcenary property are that the interest of companyarceners devolves by survivorship and number by inheritance and that the male issue of a companyarcener acquires an interest in the companyarcenary property by birth, number as representing his father but in his own independent right acquired by birth. 1 1965 1 S.C.R. 26. Property inherited by a Hindu female who has entered the gotra of the deceased owner by marriage acquires according to all schools of Hindu law a widows estate or a Hindu womans estate. In that estate her right is of an owner and number that of a tenant-for-life the property is vested in her and she represents it companypletely so long as she is alive numberone has any vested interest in the property held by her. Her rights of alienation are however restricted she may alienate the companypus of the property only for purposes of legal necessity or benefit of the estate. The limited estate of a Hindu female postulates ownership in the property held by her subject to restrictions on her power of alienation and devolution of that property on extinction of the estate of the female on the heirs of the last full owner. By the Act certain antithetical companycepts are sought to be reconciled. A widow of a companyarcener is invested by the Act with the same interest which her husband had at the time of his death in the property of the companyarcenary. She is thereby introduced into the companyarcenary, and between the surviving companyarceners of her husband and the widow so introduced, there arises companymunity of interest and unity of possession. But the widow does number on that account become a companyarcener though invested with the same interest which her husband had in the property she does number acquire the right which her husband companyld have exercised over the interest of the other companyarceners. Because of statutory substitution of her interest in the companyarcenary property in place of her husband, the right which the other companyarceners had under the Hindu law of the Mitakshara school of taking that interest by the rule of survivorship remains suspended so long as that estate enures. But on the death of a companyarcener there is numberdissolution of the Coparcenary so as to carve out a defined interest in favour of the widow in the companyarcenary property Lakshmi Perumallu v. Krishnavenamma. 1 The interest acquired by her under s. 3 2 is subject to the restrictions on alienation which are inherent in her estate. She has still power to make her interest definite by making a demand for partition, as a male owner may. If the widow after being introduced into family to which her husband belonged does number seek partition, on the termination of her estate her interest will merge into the companyarcenary property. But if she claims partition, she is severed from the other members and her interest becomes a defined interest in the companyarcenary property, and the right of the other companyarceners to take that interest by survivorship will stand extinguished. If she dies after partition or her estate is otherwise determined, the interest in companyarcenary property which has vested in her will devolve upon the heirs of her husband. It is true that a widow obtaining, an interest in companyarcenary property by s. 3 2 does number inherit that interest but once her interest has ceased to have the character of 1 1965 1. S.C.R. 26. undivided interest in the property, it will upon termination of her estate devolve upon her husbands heirs. To assume as has been done in some decided cases that the right of the companyarceners to take her interest on determination of the widows interest survives even after the interest has become definite, because of a claim for partition, is to denude the right to claim partition of all reality. Counsel for the appellant companytended that the right vested in the surviving companyarceners to take the interest vested in the widow enures so long as the widow does number, by suit or by private arrangement reduce her interest in the property of the companyarcenary to exclusive possession. He submitted that the expression partition in S. 3 3 means number merely severance of status, but division of interest by metes and bounds followed by assumption of exclusive possession by the widow. There is numberwarrant for this submission. The widow acquires by statute the same right to claim partition which a male owner has, and as pointed out by the Judicial Com- mittee of the Privy Council in Giria Bai v. Sadashiv Dhundiraj and Others 1 In Hindu law, partition does number mean division of property into specific shares it companyers both division of title and division of property. In the Mitakshara, Vijnaneswara defines the word vibhaga, which is usually rendered into English by the word partition, as the adjustment of divers rights regarding the whole by distributing them In particular portions of the aggregate. Mitra Misra explains in the Viromitrodaya the meaning of this passage he shows that the definition of Vijnaneswara does number mean exclusively the division of property into specific shares as alone giving right to pro- perty, but includes the ascertainment of the respective rights of the individuals, who claim the heritage jointly. He says Sarkars translation, ch. I., s. 36 For partition is made of that in which proprietary right has already arisen, companysequently partition cannot property be set forth as a means of proprietary right. Indeed, what is effected by partition is only the adjustment of the proprietary right into specific shares. This right to claim partition which a male owner may exercise is companyferred upon a Hindu widow by s. 3 3 . On the making of a claim for partition the interest of the widow gets defined. The right which the widow may claim is number different from the right which her husband companyld claim if he had been alive, therefore the right of the companyarceners to take the joint property by survivorship on the death of a companyarcener does number survive a demand for partition by the widow in the companyarcenary. L. R. 43 I. A. 151. The interest which a widow acquires under s. 3 2 of Act 18 of 1937 has numberanalogy with the interest which a female member of a Hindu joint family acquires in the property of the joint family allotted to her on partition between her sons or grandsons. It is true, as observed in Pratapmull Agarwalla v. Dhanabati Bibi and Others 1 that under Mitakshara law when the family estate in a Hindu joint family is divided a wife or mother is entitled to a share, but is number recognized as the owner of such share until the division of the property is actually made, as she has numberpre-existing rights in the estate save a right of maintenance. If she dies before the property is divided, her share in the property falls back into the property from which it was carved out. But a Hindu widow acquires under s. 3 2 , even before division of the property, an interest in property and that interest gets defined as soon as an unequivocal demand for partition is made by her. The dictum of the Madras High Court in Movva Subba Rao and Another v. Movva Krishna Prasadam and Anr 2 that the widows interest is a personal interest and companyes to an end on her death cannot be regarded as a companyrect statement of the law. The view expressed by the Nagpur High Court in Shamrao Bhagvantrao v. Kashibai and others 3 that the right of a widow to obtain her share in the joint family property even after a suit for partition is filed by the widow under the Hindu Womens Right to Property Act is a special one. It companyes to an end with the widow, when her death occurs during the pendency of a suit filed by her . The cause of action is number extended to her legal representatives and the observations made by the Madhya Pradesh High Court in Bhagabai v. Bhaiyalal Others 4 that the property obtained by a widow of a deceased companyarcener after a suit for partition does number become the separate property of her deceased husband and on her death the property reverts to the companyarcenary, proceed upon an assumption which is inconsistent with well settled rules of Hindu Law according to the Mitakshara school. The assumption that though the right vested in the widow by the Act is a right of property which may on demand for partition become separated from the companyarcenary property, it is still liable to revert to the companyarcenary on the determination of the widows estate, does number give full effect to the statutory companyferment upon the widow of the same right of claiming partition as a male owner. The following observations made by Subba Rao., J., in delivering the judgment of the Full Bench in Parappagari Parappa alias Hanumanthappa and Another- v. Parappagari Nagamma and L.R. 63 I. A. 33. 2 I.L.R. 1954 Mad. 257. A.I.R. 1956 Nag. 110. 4 I.L.R. 1957 M.P. It 4. Others, 1 in our judgment, companyrectly set out the effect of the Act on the question under review She companyld ask for partition and separate possession of her husbands share. In case she asked for partition, her husbands interest should be worked out having regard to the circumstances obtaining in the family on the date of partition. If she divided herself from the other members of the family during her lifetime, on her demise the succession would be traced to her husband on the basis that the property was his separate property. If there was number severance, it would devolve by survivorship to the other members of the joint Hindu family On the finding recorded by the Trial Court which was number challenged in appeal before the High Court, Babuji did number separate in 1934 from the other companyarceners. But he died in October 1937 and by the operation of Act 18 of 1937 as modified by Bihar Act 6 of 1942 Chando Kuer was invested with her husbands interest in the companyarcenary property agricultural as well as number-agricultural. When she instituted a suit for partition that interest became de- fined, and vested in her free from all claims or rights of the companyarceners of her husband. The right of the companyarceners to take that interest by survivorship on Chando Kuers death was then extinguished.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 411 to 415 of 1965. Appeals from the judgment and order dated June 22, 1962, of the Bombay High Court in 1. T. R. N. 34 of 1960. S. Bobde, and O. C. Mathur, for the appellant In C. As. Nos. 411-413 of 1965 and the respondent In C.As. Nos. 414 and 415 of 1965 . Sen, Gopal Singh and R. N. Sachthey,for the respondent in C.As. Nos. 411-413 of 1965 and the Appellant in C. As. Nos. 414 and 415 of 1965 . The Judgment of the Court was delivered by Ramaswami, J. These five appeals companysolidated by an order of the Bombay High Court arise out of a Reference made by the Income-tax Appellate Tribunal, Bombay Bench A on January 2, 1959 and decided by the Bombay High Court on September 22, 1962. The High Court granted certificates to appeal against its judgment under s. 66-A of the Income Tax Act, 1922 to both the Commissioner of Income-Tax, Central Bombay and the assessee. Civil Appeals Nos. 411 to 413 of 1965 are brought on behalf of the assessee and Civil Appeals Nos. 414 and 415 of 1965 are brought on behalf of the Commissioner of Income-Tax, Central Bombay. Hukumchand Mills Ltd. hereinafter referred to as the assessee is a public companypany incorporated in the previous Indore State. The assessee owns a textile mill there. Up to the assessment year 1949-50 it was being assessed in British India as a number-resident except in 1948-49 when it was assessed as a resident , on such income as fell within s. 4 1 a or 4 1 c read with s. 42 of the Income Tax Act, 1922 hereinafter referred to as the Act . After the Constitution came into force, Indore became a Part B State and the Act was brought into force in such States with effect from April 1, 1950. The assessee therefore became liable to be assessed as a resident from the assessment year 1950-51. The assessee was accordingly assessed as a resident in the years 1950-51, 1951-52 and 1952-53, One of the questions which arose for determination in the assessments for these years was the proper written down value of the buildings, machinery etc. of the assessee for calculating the depreciation allowance under s. 10 2 vi of the Act. The assessee relied upon s. 10 5 b and companytended that the original companyt of the machinery, buildings etc. should be taken for this purpose. That sub-clause provided that in the case of assets acquired before the previous year the written down value was the actual companyt less all depreciation actually allowed to the assessee under the Act or any Act repealed thereby. But as numberdepreciation had been actually allowed under the Act, the assessee companytended that the original companyt should be taken as the basis of allowing depreciation without taking into companysideration the number of years during which the machinery had been working or the depreciation it had suffered or the written down value entered in the books. The case of the Department, on the companytrary, was that as it was necessary to determine the total income of the assessee to arrive at the taxable proportionate income of the assessee under the Act as a number- resident and as depreciation had been allowed to arrive at such total income, the same must be taken into account to arrive at the written down value as it had been actually allowed within the meaning of s. 10 5 b . The Income-tax Officer and the Appellate Assistant Commissioner rejected the companytention of the assessee but the Tribunal, by its order dated October 8, 1958 held that only that part of the depreciation which entered into the companyputation of the taxable income of the assessee under the Act can be treated as depreciation actually allowed and number the total depreciation which went into the companyputation of the total income. it was urged before the Tribunal by the Department that al- though the Income Tax Officer had number companysidered the provisions of paragraph 2 of the Taxation Laws Part B States Removal of Difficulties Order, 1950 hereinafter referred to as the Taxation Laws Order , the said provisions were applicable in the present case and certain amounts of depreciation which are allowed under the Industrial Tax Rules, which had the force of law in the Indore State, were required to be deducted in arriving at the written down value of the assets of the assessee. The Tribunal permitted this companytention to be raised by the Department. It was pointed out on behalf of the assessee that the companytention companyld number be entertained unless it was found as a fact that the depreciation was actually allowed under the Industrial Tax Rules to the assessee, and unless it was also further held that the Industrial Tax Rules were rules which related to income-tax or super-tax, or any law relating to tax on profits of business. Paragraph 2 of the Taxation Laws Order provides as follows- Computation of aggregate depreciation allowance and the written down value.-In making any assessment under the Indian Income- tax Act, 1922, all depreciation actually allowed under any laws or rules of a Part B State relating to income-tax and super-tax or any law relating to tax on profits of business, shall be taken into account in companyputing the aggregate depreciation allowance referred to in sub-clause c of the proviso to clause vi of subsection 2 and the written down value under clause b of sub- section 5 , of section 10 of the said Act. In view of this submission made by the parties the Tribunal remanded the matter back to the Income Tax Officer for ascertaining whether any depreciation was allowed under the Industrial Tax Rules and for companysidering the question whether the said rules related to income-tax or super-tax or any law relating to tax on profits of business and if he decided these questions in favour of the Department he should take into companysideration such depreciation actually allowed under the said rules for the purposes of companyputing the written down value. Under s. 66 1 ,of the Act the Tribunal referred the following questions of law for the determination of the High Court lm15 Whether the words all depreciation actually allowed used in section 10 5 b , of the Indian Income-tax Act refer only to the depreciation allowed for the purpose of determining the amount liable to Indian income-tax. Whether the provisions of paragraph 2 of the Taxation Laws Part B States Removal of Difficulties Order, 1950, apply and were companyrectly applied to the facts of the case. By its judgment dated June 22, 1962 the High Court agreed with the view taken by the Tribunal on the first question and answered it in favour of the assessee. As regards the second question, the High Court held as follows- We do number find anything in the Tribunals order which indicates that any companytention was raised before the Tribunal that paragraph 2 had numberapplication to the case. What was companytended was that the questions whether any depreciation was allowed under the Industrial Tax Rules, or if it was so allowed, whether such depreciation was under any law or rules relating to income-tax or super-tax etc. number having been determined, the companytention raised by the Department on the basis of paragraph 2 of the Taxation Laws Part B States Removal of Difficulties Order, 1950, companyld number be entertained at that stage, and that companytention has been accepted by the Tribunal. In these circumstances, our answer to question No. 2 as framed is that Paragraph 2 of the Taxation Laws Part B States Removal of Difficulties Order, 1950, is a valid provision of law, but it will have application to the present case only if the questions which the Tribunal has asked the Income-tax officer to determine, are determined by the Income-tax Officer in favour of the Department. Civil Appeals Nos. 411 to 413 of 1965 The sole question argued on behalf of the assessee in these appeals is that the Tribunal was number companypetent to go into the question whether the provisions of paragraph 2 of the Taxation Laws Order were applicable to the present case and the respondent should number have been allowed to raise the companytention for the first time before the Tribunal. It was also argued that the Tribunal ought number to have remanded the case to the Income Tax Officer for ascertaining whether any depreciation was allowed under the Industrial Tax Rules and whether such depreciation should be taken into account for the purpose of companyputing the written down value. In our opinion there is numberjustification for this argument. In the first place, numberobjection was raised before the Tribunal or before the High Court that the Department should number have been allowed to raise the question for the first time with regard to the application of paragraph 2 of the Taxation Laws Order. We shall, however, assume in favour of the assessee that the question was implicit in the question actually framed and referred to the High Court. Even upon that assumption we are of opinion that the Tribunal had jurisdiction to permit the question to be raised for the first time in appeal. The powers of the Tribunal in dealing with appeals are expressed in s. 33 4 of the Act in the widest possible terms. Section. 33 3 of the Act states that An appeal to the Appellate Tribunal shall be in the prescribed form and shall be verified in the prescribed manner Section 33 4 reads as follows- The Appellate Tribunal may, after giving both parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and shall companymunicate any such orders to the assessee and to the Commis- sioner. Me word thereon, of companyrse, restricts the jurisdiction of the Tribunal to the subject-matter of the appeal. The words pass such orders as the Tribunal thinks fit include all the powers except possibly the power of enhancement which are companyferred upon the Appellate Assistant Commissioner by s. 31 of the Act. Consequently the Tribunal has authority under this section to direct the Appellate Assistant Commissioner or the Income Tax Officer to hold a further enquiry and dispose of the case on the basis of such enquiry. Rule 12 of the Appellate Tribunal Rules, 1946 made under s. 5A 8 of the Act provides as follows- The appellant shall number, except by leave of the Tribunal, urge or be heard in support of any ground number set forth in the memorandum of appeal but the Tribunal, in deciding the appeal, shall number be companyfined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal under this rule Provided that the Tribunal shall number rest its decision on any other ground unless the party who may be affected thereby has had a sufficient opportunity of being heard on that ground. Rule 27 states The respondent, though he may number have appealed, may support the order of the Appellate Assistant Commissioner on any of the grounds decided against him. Rule 28 is to the, following effect Where the Tribunal is of opinion that the case should be remanded, it may remand it to the Appellate Assistant Commissioner or the Income-tax Officer, with such directions as the Tribunal may think fit. in the present case, the subject-matter of the appeal before the Tribunal was the question as to what should be the proper written down value of the buildings, machinery etc. of the assessee for calculating the depreciation allowance under S. 10 2 vi of the Act. It was certainly open to the Department, in the appeal filed by the assessee before the Tribunal, to support the finding of the Appellate Assistant Commissioner with regard to the written down value on any of the grounds decided against it. It was argued on behalf of the appellant that the action of the Tribunal in remanding the case is number strictly justified by the language of Rule 28 or Rule 12. Even assuming that Rules 12 and 28 are number strictly applicable to the case, we are of opinion that the Tribunal has got sufficient power under s. 33 4 of the Act to entertain the argument of the Department with regard to the application of paragraph 2 of the Taxation Laws Order and remand the case to the Income Tax Officer in the manner it has done. It is necessary to state that Rules 12 and 28 are number exhaustive of the powers of the Appellate Tribunal. The rules are merely procedural in character and do number, in any way, circumscribe or companytrol the power of the Tribunal under s. 33 4 of the Act. We are accordingly of the opinion that the Tribunal had jurisdiction to entertain the argument of the Department in this case and to ,direct the Income Tax Officer to find whether any depreciation was actually allowed under the Industrial Tax Rules and whether such depreciation should be taken into companysideration for the purpose of companyputing the written down value. For these reasons we reject the argument of Mr. Bobde on behalf of the assessee and dismiss these appeals.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 324 of 1965. Appeal by special leave from the judgment and order dated August 20,1963, of the Kerala High Court in I.T.R. Case No. 16 of 1962. K. Sen, G. L. Sanghi, and B. R. Agarwala, for the appel- lant. T. Desai, S. K. Iyer and R. N. Sachthey for the respon- dent. The Judgment of the Court was delivered by Ramaswami, J.-The appellant is a limited companypany incorpora- ted under the Travancore Companies Regulation and is carrying on business, in the State of Kerala,of manufacturing sugar, running a distillery and also a tincture factory. The appellant-company was floated with a veiw to taking over the business assets of a companypany called Travancore Sugars Ltd. which was being wound up and in which the State Government held the largest number of shares , the Government Distillery at Nagercoil and the business assets of the Government Tincture Factory at Trivandrum. For this purpose an agreement dated June 18, 1937 was entered into between the Government of Travancore and Sir William Wright on behalf of Parry Co. Ltd., the Promoters of the appellant-company. Under the said agreement the assets of all the three companycerns were agreed to be sold by the Government of Travancore to the appellant- companypany. Clause 3 of the agreement provided that the cash companysideration for the sale of assets of the Travancore Sugars Ltd. shall be 3 .25 lakhs rupees. Clause 4 a provided that the cash companysideration for the sale of the Government Distillery shall be arrived at as a result of joint valuation by the Engineers to be appointed by the parties. Clause 5 a stated that the cash companysideration for the sale of assets of the Government Tincture Factory shall be the value according to the books. Under cl. 4 b and c of the agreement the Government undertook to recognise the transfer of the licence from the licensees of the Distillery to the appellant and to secure to it the companytinuance of the licence for a companytinuous period of five years after the termination of the then existing licence. Under cl. 5 b of the agreement the Government agreed to purchase the pharmaceutical products manufactured by the appellant in the Tincture Factory, for its medical requirements. Under cl. 6 of the agreement all books of account and companynected documents are to be open to inspection by the authorised officers of the Government. Under cl. 10 the Government was entitled to numberinate a director on the Board of Directors of the appellant- companypany who would number be entitled to any -voting power or to interfere with the numbermal management of the companypany. Apart from the cash companysideration referred to in the agreement, cl. 7 of the said agreement provided for futher payments as folows 7 . The Government shall be entitled to twenty per cent of the net profits earned by the companypany in every year subject however to a maximum of Rupees forty thousand per annum, such net profits for the purposes of this clause to be ascertained by deduction of expenditure from gross income and also after- provision has been made for depreciation at number less than the rates of allowances provided for in the income-tax law for the time being in force, and payment of the Secretaries Treasurers remuneration. By another agreement dated January 28, 1947 the following clause was substituted for the above cl. 7 of the original agreement The Government shall be entitled to ten per cent of the net profits of the Company in every year. For the purpose of this clause net profits means the amount for which the Companys audited profits in any year are assessed to Income-tax in the State of Travancore. For the assessment year 1958-59 the companyresponding previous year being May 1, 1956 to April 30, 1957 the amount payable to Government under the aforesaid cl. 7 came to Rs 42,480/-. The appellate Assistant Commissioner disallowed the claim of the appellant for deduction of this amount on the ground that it was virtually mere sharing of profits after they came into existence. The appellate Assistant Commissioner relied upon the decision in The Pondicherry-Railway Company C.I.T. 1 in disallowing this item of expenditure. The appellant preferred an appeal against the order of the appellate Assistant Commissioner to the Income-tax Appellate Tribunal which held that the case came within the principle of the decision in British Sugar and Manufacturers Ltd. v. Harris. Inspector of Taxes 2 and that the payment of company- mission was an expenditure made in order to earn profits of the business and number an expenditure paid out of earned profits. In the result the Tribunal allowed the appeal by the Company. At the instance of the respondent the Tribunal referred the following question of law to the High Court of Kerala Whether on the facts and in the circumstances of the case, the payment of Rs. 42,480/- by the assessee to the Travancore Government under the agreements dated 1 5 I.T.C. 363. 58 I.A. 239. 2 1939 I.T.R. 101. 18-6-1937 and 28-1-1947 was allowable under sec. 10 of the Income-tax Act? By its judgment dated August 20, 1963, the High Court held that the payment of the aforesaid amount companystituted capital expenditure and was number allowable under s.10 2 xv of the Income Tax Act. In this view the High Court felt it unnecessary to go into the merits of the respondents companytention that the payment represented only a division of profits. The present appeal is brought, by special leave, from the judgment of the High Court of Kerala dated August 20, 1963. On behalf of the appellant Mr. Asoke Sen submitted that the payment of Rs. 42,480/- was number capital expenditure but was expenditure of revenue nature which was allowable under s. 10 2 xv of the Act. It was pointed out that the annual payments under cl. 7 were number part of the purchase price of the assets.Reference was made to cls. 3, 4 a and 5 a of the agreement and it was said that separate and full companysiderations were provided for the purchase of the assets of Travancore Sugars Ltd., the Government Distillery and the Government Tincture Factory. In addition to selling these asssets the Government undertook obligations enumerated in cls. 4 b and c and 5 b already referred to. It was companytended that the appellant agreed to make annual payments to Government in companysideration of these obligations. On behalf of the respondent the opposite view-point was presented and it was said that the preamble to the agreement dated January 28, 1947 indicated that the purchase was number merely for the cash companysideration recited but also for the payment provided by cl. 7. Reference was made to the following portion of the preamble of the agreement dated January, 28, 1947. WHEREAS on 18th June 1937 an agreement here- inafter called the principal agreement was entered into between M. R. Ry. Rao Bahadur Rajyasevanirata N. Kunjan Pillai Avl., Chief Secretary to Government acting for and on behalf of the said Government of His Highness -the Maharaja of Travancore of the one part and Sir William Wright, Kt., C.B.E., of Messrs. Parry Co. Ltd., Madras, acting for and on behalf of the said Messrs. Parry Co. Ltd., of the other part, whereby the said Government should sell and the companypany should purchase the assets including the lands of the Travancore Sugars Ltd., with the buildings, out-houses, machinery and other things attached thereto and more particularly described in the Schedule A annexed to the said principal agreement, the factory known as the Government Distilleries situate at Nagercoil in South Travancore with lands, buildings, machinery and other things attached thereto and more particularly described in the Schedule B annexed to the principal agreement, and all the assets of the factory known as the Government Tincture Factory situated at Trivandrum and more particularly described in the Schedule C annexed to the principal agreement for the cash companysideration in the said principal agreement mentioned and also in companysideration inter alia that the Government should be entitled to 20 Y. twenty per cent of the said net profits earned by the Company in every year subject however to a maximum of Rs. 40,000/per annum, such net profits for purposes of the said agreement to be ascertained after the deductions set out in clause 7 of the said agreement. It is often difficult, in any particular case, to decide and determine whether a particular expenditure is in the nature of capital expenditure or in the nature of revenue expenditure. It is net easy to distinguish whether an agreement is for the payment of price stipulated in instalments or for making annual payments in the nature of income. The companyrt has to look number only into the documents but also at the surrounding circumstances so as to arrive at a decision as to what was the real nature of the transaction from the companymercial point of view. No single test of universal application can be discovered for a solution of the question. The name which the parties may give to the transaction which is the source of the receipt and the characterization of the receipt by them are of little companysequence. The companyrt has to ascertain the true nature and character of the transaction from the companyenants of the agreement tested in the light of surrounding circumstances. Examining the transaction from this point of view it is clear in the present case that the companysideration for the sale of the three undertakings in favour of the appellant was 1 the cash companysideration mentioned in the principal agreement, viz., cls. 3, 4 a and 5 a , and 2 the companysideration that Government shall be entitled to twenty per cent of the net profits earned by the appellant in every year subject to a maximum of Rs. 40,000/- per annum. With regard to the second part of companysideration there are three important points to be numbericed. In the first place, the payment of companymission of twenty per cent on the net profits by the appellant in favour of the Government is for an indefinite period and has numberlimitation of time attached to it. In the second place, the payment of the companymission is related to the annual profits which flow from the trading activities of the appellant-company and the payment has numberrelation to the capital value of the assets. In the third place, the annual payment of 20 per cent companymission every year is number related to or tied up, in any way, to any fixed sum agreed between the parties as part of the purchase price of the three undertakings. There is numberreference, to any capital sum in this part of the agreement. On the companytrary, the very nature of the payments excludes the idea that any companynec SupCI/66-19 tion with the capital sum was intended by the parties. It is true that the purchaser may buy a running companycern and fix a certain price and the price may be payable in a lump sum or may be payable by instalments. The mere fact that the capital sum is payable by instalments spread over a certain, length of time, will number companyvert the nature of that payment from the capital expenditure into a revenue expenditure, but the payment of instalments in such a case would always have some relationship to the actual price fixed for the sale of the particular undertaking. As we have already mentioned, there is numberspecific sum fixed in the present case as an additional amount of price payable in addition to the cash companysideration and payable by instalments or by any particular method. In view of these facts we are of opinion that the payment of the annual sum of Rs. 42,480/ in the present case is number in the nature of capital expenditure but is in the nature of revenue expenditure and the judgment of the High Court of Kerala on this point must be overruled. The view that we have expressed is borne out by the decision of the Court of Appeal in Commissioners of Inland Revenue v. 36/49 Holdings. Ltd. In Liquidation 1 . In that case, an undertaking was sold and the price companysisted of fixed amount and a certain companymission payable for an indefinite period. The companysideration in the particular agreement which the Court of Appeal had to companysider, which was in addition to the fixed amount payable by the purchaser to the vendor, was I shilling for each bicycle number being mechanically propelled bicycle without deduction and pound for each mechanically propelled bicycle without deduction, and this was to be paid on the turnover by the purchasing companypany. This sum of 1 shilling and pound was to be paid without any limitation of time, and this sum was number related to any special sum as being part of the price to be paid by the purchaser to the vendor. In the companyrse of his judgment, Lord Greene, Master of the Rolls observed as follows at page 182 of the, report. The true nature of a sum payable to a recipient for purposes such as the present is to be ascertained from all the circumstances relevant to that matter-. The true nature of the sum is number necessarily its nature in law, but its nature in business or in accountancy whichever way one likes to put it, because from the legal point of view there may be numberdifference whatsoever as between the parties between a capital and an income sum. - It may be totally irrelevant to the legal relationships into which they are proposing to enter. When, however, the tertius gaudens, in the shape of the Revenue, appears on the scene, that matter which as between the parties may have been a matter of number the slightest importance becomes immediately a matter of very great importance, and it is necessary to examine the circumstances 1 1943 25 T.C. 173. .lm15 of each individual case, including any documents which require to be companystrued, in order to ascertain what is the character to be attributed to the payment. The same view was taken by the Bombay High Court in Commissioner of Income-tax, Bombay City v. Kolhia, Hirdagarh Co. Ltd. Bombay 1 . In that case, there was an agreement between the proprietor of a companyliery and C by which it was agreed to promote the assessee companypany for the purpose of acquiring and carrying on the companyliery. The purchase price was fixed at rupees one lac which was to be discharged by the payment of a sum of Rs. 75,000/- in cash and the allotment of fully paid shares of the face value of Rs. 25,000/- to the vendor. It was also agreed that the vendor should be paid the Minimum annual dividend of four annas for every ton of companyl raised from the companyliery and if there was any deficit in any year the companypany would make up such deficit, Under the draft Articles of Association of the companypany the vendor was to get, in respect of the companysideration for shares, 500 preference shares or Rs. 50/- each and a fixed cumulative preferential dividend equivalent to four annas per ton of companyl raised and railed in each year. The vendor approved the draft articles and in a letter stated that he should get four annas per ton permanently on all companyls despatched from the companyliery every year, without any hindrance whatsoever. irrespective of any loss or gain to the companypany. The assessee-company was incorporated and the formal agreement of sale was entered into between it and the vendor. Subsequently it was found impossible to pay to the vendor a fixed dividend and therefore a fresh agreement was executed tinder which the vendor agreed to give up all the dividends to which he was entitled and to permit the companypany to companyvert the preference shares into ordinary shares. In companysideration of this, the companypany agreed to pay a companymissioner to the vendor at the rate of four annas per ton of steam and rubble companyl and three annas per ton of slack companyl raised from the companyliery and sold and rented by the companypany from the companyliery. The question arose whether the sum representing the companymission paid by the assessee companypany to the vendor under the terms of the agreement was a revenue expenditure. It was held by the Bombay High Court that as the payment made by the assessee companypany was a payment made for an indefinite period, a payment made in relation to the turnover of the companypany and number in relation to its profits, and as the payment had numberbearing to any specific sum fixed as part of the price for the purchase of the Undertaking, it was in the nature of a revenue payment and number a capital payment. On behalf of the respondent Mr. S. T. Desai referred to the decision of the Judicial Committee in Minister of National Revenue 1 17 I.T.R. 545. Catherine Spooner 1 , In that case, the assessee had sold all her right, title and interest in some land which she owned in freehold to a companypany in companysideration of a certain sum in cash, of certain shares in the companypany and an agreement to deliver to her 10 per cent of oil produced from the land. The transferee companypany, after it had companymenced operations, struck oil and raised some of it in the year of account, but did number deliver to the assessee any part of the oil produced. The transferee companypany sold the whole of it and paid over 10 per cent of the gross proceeds to the assessee which she accepted in satisfaction of the royalties reserved to her under the agreements The question arose whether the amount which the lady received in lieu of the oil was annual profit or gain from any other source, and the Appellate Court in Canada held that it was number so, but was a capital receipt. On appeal the Judicial Committee agreed with the Appellate Court in Canada that the case was number without its difficulties, but in the end they said that they were number prepared to differ from the view of the transaction which an eminent Judge like Newcombe, J. had taken and with which all his companyleagues had agreed. The decision of the Judicial Committee turned on special facts of that case, viz., that the lady had bargained to receive her share in oil and that there companyld be numberprofit or gain out of the transaction of that kind. The case was an exceptional one and the ratio of that decision cannot be applied to the present case where the facts are manifestly different. We may, however, refer to the decision in Jones Commissioners of Inland Revenue where property was companyveyed in companysideration of periodical payments, the payment being a share of the profits of the business. In that case, a person sold his interest in certain inventions and letters-patent for pound 750 in cash and a percentage, called a royalty, payable for ten years on the sale of all machines companystructed under the patent. Of the sum of pound 750, pound 300 was paid in cash, but the payment of the balance was secured by providing that it would have to be paid by way of 5 per cent on the sale of the machines. It was companyceded by the Revenue that this 5 per cent was number to be included in companyputing the total income of the transferor. A question having arisen with regard to the further 10 per cent. Rowlatt , J. observed as follows The property was sold for a certain sum, and in addition the vendor took an annual sum which was dependent upon the volume of business done that is to say, he took something which arose or fell with the chances of the business. When a man does that he takes an income-it is in the nature of income. The principle of this case applies to the persent case where the facts are closely parallel. 1 1933 A.C. 6 4. 2 1920 1 K.13. 711. It is number, however, possible for us to finally determine this appeal because the High Court has number dealt with the other questions arising in this reference. Even if the payment of the companymission to the Government by the assessee is number capital but revenue payment, certain other questions arise for companysideration in this case. In the first place, it has to be determined whether the appellant is right in his argument that the payment of the companymission is tantamount to diversion of profits by a paramount title. In this companynection reliance was placed on behalf of the appellant upon the decision in Raja Bajoy Singh Dudhuria v. Commissioner of Income Tax Bengal 1 in which the assessee succeeded to the family ancestral estate on the death of his father. Subsequently his step-mother brought a suit for maintenance against him in which a companysent decree was made directing the assessee to make a monthly payment of a fixed sum to his step-mother and declaring that the maintenance was a charge on the ancestral estate in the hands of the assessee. In companyputing his income, the assessee claimed that the amounts paid by him to the step-mother under the decree should be excluded. It was held by the Judicial Committee that the sums paid by the assessee to his step- mother were number income of the assessee at all and that the decree of the companyrt by charging the appellants whole resources with a specific payment to his step-mother had to that extent diverted his income from him and had directed it to his step-mother, and to that extent what he received for her was number his income. It was number a case of the application by the appellant of part of his income in a particular way it was rather the allocation of a sum out of his revenue before it became income in his hands. Reliance was also placed on the decision of this Court in Poona Electric Supply Co. Ltd. v. Commissioner of IncomeTax. Bombay City 2 in which a distinction was drawn between real profits ascertained on companymercial principles and profits fixed by statute for a specified purpose. In the second place, the respondent has companytended that the transaction should be treated as a joint venture with an agreement to share profits between the appellant ,and the Government. In the third place, the High Court has to ,examine whether the requirements of s. 10 2 xv have been satisfied in this case. On behalf of the respondent the argument was presented that the payment of companymission was a payment out of the profits of the appellant on companydition of profits being earned and that it was number a payment made to earn profits. Reference was made to the decision of the Judicial Committee in Pondicherry Railway Co. Ltd. v. Commissioner of Income-tax. 3 The opposite view-point was presented on behalf of the appellant and it was argued that the payment of the companymission was a payment wholly and exclusively laid out for the purpose of business and reference was made to the decision of the Judicial Committee in Indian Radio 1 1933 I.T.R. 135. 2 57 I.T.R.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 94 of 1966. Appeal by special leave from the judgment and order dated November 24, 1964 of the Assam and Nagaland High Court in Civil Rule No. 208 of 1964. Sarjoo Prasad, H.Goswami and D. N. Mukherjee, for the appellant. Gopalakrishnan, for respondent No. 1. The Judgment of the Court was delivered by Mitter,J.This is an appeal by special leave from a judgment and order of the High Court of Assam and Nagaland dated January 24, 1964 passed in Civil Rule No. 208 of 1964 under Art. 226 of the Constitution of India. The sole question involved in this appeal is whether the High Court was right in quashing the order of the Board of Revenue on the ground that the very basis on which the appellate order of the Board was founded did number exist and that the Board had gone wrong in taking into companysideration the companypounding of an offence under the Forest Regulation by the petitioner before the High Court as affecting his suitability in getting settlement of an excise shop in Dibrugarh area. The facts necessary for the disposal of this appeal are as follows. One Biswabahan Das, the appellant before us, was the lessee of the said shop from 1956 to 1962. The shop was settled with him again for the term 1962-64 by the Deputy Commissioner. On appeal to the Board of Revenue, this was set aside, on the basis of a report submitted by the Inspector of Excise and the shop was settled with the present respondent. Biswabahan went to the Assam High Court with a writ petition and succeeded there on the ground that the evidence of the Inspector had been taken behind his back and as such should number have been taken into companysideration, but the High Court also held in that matter that numberuseful purpose would be served by granting any relief to Biswabahan at that late stage when the period of the licence was about to expire. This had the result that Hazarika remained the lessee of the shop when a fresh settlement became due. The Deputy Commissioner settled the shop with Hazarika again for the years 1964 to 1967. This settlement was challenged in appeal before the Board of Revenue. The Board went into the question as to whether Hazarika was a suitable person because as the holder of a firewood mahal licence he had companypounded an offence of illegally felling green trees by paying Rs. 50 when he was acting as a forest companytractor. From the appellate order of the Board of Revenue which was .quashed by the High Court, it appears that a Forest Beat Officer of Dibru Reserve had detected that Hazarika had illegally felled some green trees and companyverted them into firewood although under the agreement between him and the authorities he was only entitled to cut and companylect firewood from dead and fallen trees. There was numberdispute that Hazarika had paid companypensation of Rs. 50 in respect thereof and had filed an affidavit before the Board of Revenue that a mistake had been companymitted by his labourers in companylecting some broken and fallen green trees in his absence. The Board was number satisfied with this explanation and took the view that the fact of Hazarika having companypounded the offence did number clear his companyduct although he had succeeded in getting a sub- sequent settlement of a forest mahal. It was observed by the Board, forest mahals and excise shops are settled under different sets of rules and the fact that the respondent Hazarika was companysidered suitable for one would number automatically entitle him to the other. In the matter of settlement of excise shops, the settling authority is entitled under Executive Instruction III to take other factors under companysideration including the moral character of the tenderer in determining his suitability. This Board has companysistently held that companyduct of a tenderer is a valid companysideration in this companytext. In view of his companyduct as discussed above we do number companysider respondent Hazarika to be a suitable candidate and are unable to uphold the settlement made with him. The High Court relied on s. 345 6 of the Criminal. Procedure Code to reach the companyclusion that the companypounding of the offence had the effect of an acquittal with the result that once the offence was companypounded the Board was number entitled to take into account the propriety or otherwise of the companyduct of Hazarika in respect of the offence with which he had been charged. Before us Mr. Sarjoo Prasad appearing in support of the appeal companytended that s. 345 6 of the Criminal Procedure Code had numberapplication to an offence under the Assam Forest Regulation VII of 1891. Sub-section 5 of s. 3 of the said Regulation defines a forest offence as an offence punishable under the Regulation or any rule thereunder. Section 62 sub-s. 1 of the said Regulation which has the marginal numbere power to companypound offences provides- The State Government may, by numberification in the official Gazette, empower a Forest Officer by name, or as holding an office,- a to accept from any person against whom a reasonable suspicion exists that he has companymitted any forest offence, other than an offence specified in section 58 or section 59, a sum of money by way of companypensation for the offence which such, person is suspected to have companymitted and b when any property has been seized as liable to companyfiscation, to release the same on payment of the value thereof as estimated by such officer. Sub-section 2 provides- On the payment of such sum of money, or such value, or both, as the case may be, to such officer, the suspected person, if in custody, shall be discharged, the property, if any, seized shall be released and numberfurther proceedings shall be taken against such person or property. We may number numbere the relevant provisions of the Code of Criminal Procedure. Section 345 1 of the Code prescribes that the offences thereunder specified may be companypounded by the persons mentioned in the third companyumn of the appended Table. By subs. 2 provision is made for the companypounding of the offences specified in the first companyumn of the Table appended to this sub-section by certain persons with the permission of the companyrt before which any prosecution for the offence is pending. Sub-s. 6 lays down that- The companyposition of an offence under this section shall have the effect of the acquittal of the accused with whom the offence has been companypounded. It is, therefore, clear that to have the effect of an acquittal the offence companypounded must be one specified either under sub-s. 1 or sub-s. 2 . The principle behind the scheme seems to be that wrongs of certain classes which affect mainly a person in his individual capacity or character may be sufficiently redressed by companyposition with or without the leave of the companyrt as the case may be but any such companyposition would have the effect of an acquittal. It was urged by Mr. Sarjoo Prasad that assuming the effect of an acquittal to be the wiping out or negation of the wrongful companyduct on the part of the accused, the scope of sub-s. 6 was only limited to the offences specified in sub-ss. 1 and 2 of s. 345 and the principle thereof companyld number be extended to offences under other Acts unless there was a provision similar to sub-s. 6 in those Acts. It must be borne in mind that although the marginal numbere to s. 62 of the Assam Regulation is power to companypound offences the word companypounding is number used in sub-s. 1 cl. a of that section. That provision only empowers a forest officer to accept companypensation for a forest offence from a person suspected of having companymitted it. The person so suspected can avoid being proceeded with for the offence by rendering companypensation. He may think that he was being unjustly suspected of an offence and he ought to defend himself or he may companysider it prudent on his part to pay such companypensation in order to avoid the harassment of a pro- secution even when he is of the view that he had number companymitted the offence. By adopting the latter companyrse he does number remove the suspicion of having companymitted the offence unless he is to have such benefit companyferred on him by some provision of law. In effect the payment of companypensation amounts to his acceptance of the truth of the charge against him. Sub-s. 2 of s. 62 only protects him with regard to further proceedings, but has number the effect of clearing his character or vindicating his companyduct. Our attention was drawn by the learned Advocate for the res- pondent to ss. 58 and 59 of the Assam Regulation which provides for certain offences being visited with imprisonment for a term or with fine or with both and on a companyparison of those sections with s. 62 it was argued that the latter related only to very minor offences which the Legislature in its wisdom had thought companypoundable by the rendering of companypensation. It was urged that the suspicion of having companymitted a forest offence under s. 62 1 a should number amount to the imputation of any stigma on the character of the suspected person when by the rendering of companypensation for such an offence he was to be protected from further proceedings and the principle behind sub-s. 2 of s. 62 was the same as that companytained in s. 345 6 of the Code of Criminal Procedure. It was said that other statutes companytained provisions for companypounding of certain offences and the object of the Legislature in all such cases was that trivial offences once companypounded were number to be raked up again or taken any numberice of afterwards. Reference was made to the observations of the Madras High Court in Chandanmal v. Rupakula Ramkrishnayya and another 1 that an agreement to companypound an offence under s. 345 1 of the Criminal Procedure Code was number in violation of any law or public policy. We were also referred to certain general observations in the case of Reg. v. Rahimat 2 that there was a class of cases which might be the subject either of criminal or civil companynizance and if the person injured desired to obtain companypensation the law did number forbid him whereas if he invoked the penal interposition of the Magistrate, that interposition was number refused. From the above it was sought to be argued that if the wrong done was of a very trivial nature the rendering of companypensation was in the eye of the law sufficient to redress it and to put an end to the matter without any reflection on the character of the person charged with having done the wrong. We are unable to accept the above reasoning. If a person is charged with an offence, then unless there is some provision for companyposition of it the law must take its companyrse and the charge enquired into resulting either in companyviction or acquittal. If companyposition of an offence was permissible under the law, the effect of A.I.R. 1942 Mad. 173 at 176. I.L.R. 1 Bom. 147 at p. 151. such companyposition would depend on what the law provided for. If the effect of companyposition is to amount to an acquittal then it may be said that numberstigma should attach to the character of the person, but unless that is expressly provided for the mere rendering of companypensation would number amount to the vindication of the character of the person charged with the offence. The High Court, therefore, was number right in companying to the companyclusion that the effect of s. 62 of the Assam Regulation was the same as that of s. 345 6 of the Criminal Procedure Code and that numbermoral turpitude of any description companyld be said to be involved in the case. It follows that the High Court was number right in quashing the order of the Board of Revenue by the issue of a writ of certiorari. In Nagendra Nath Bora and another v. The Commissioner of Hills Division and Appeals, Assam and others 1 the Assam High Court had quashed certain orders of settlement of a number of companyntry spirit shops made by the Commissioner of the Hills Division and Appeals setting aside the orders of the Deputy Commissioner and the Excise Commissioner. It was there pointed out that the powers of the Appellate Authorities in the matter of settlement would be companyextensive with the powers of the primary authority, namely, the District Collector of the Sub-Divisional Officer. The same can be said of the powers of the Board of Revenue in this case. This Court observed p. 1259 that- There is numberdoubt that if the Appellate Authority whose duty it is to determine questions affecting the right to settlement of a liquor shop, in a judicial or quasi-judicial manner, acts in excess of its authority vested by law, that is to say, the Act and the rules thereunder, its order is subject to the companytrolling authority of the High Court. The question, therefore, is whether the High Court was right in holding that the Appellate Authority had exceeded its legal power. The Court examined at length the extent of jurisdiction of superior companyrts to issue writs of certiorari. On an examination of the authorities of this Court as also of the companyrts in England it was pointed out that one of the grounds on which the jurisdiction of the High Court on certiorari may be invoked, is an error of law apparent on the face of the, record and number every error either of law or fact, which can be companyrected by a superior companyrt, in exercise of its statutory powers as a companyrt of appeal or revision. It was also remarked that an order of certiorari was number meant to take the place of an appeal and that its purpose was only to determine whether the inferior tribunal had exceeded its jurisdiction or had number proceeded in accordance with the essential requirements of the law which it was meant to administer. 1 1958 S.C.R. 1240. In this case the Board of Revenue had number gone wrong in law in taking into companysideration Hazarikas companyduct in rendering companypensation for a forest offence. The Board was quite companypetent to take the view that Hazarika was number vigilant in observing the law even if it had found-when it did number-that Hazarikas explanation was number unconvincing. The Board cannot be said to have exceeded its jurisdiction under the law or companymitted an error apparent on the face of the record. It follows that the High Court was number justified in quashing the appellate order of the Board under Art. 226 of the Constitution. In the result, the appeal is allowed, the order of the High Court is set aside and that of the Board of Revenue is restored.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 969 of 1965. Appeal from the judgment and order dated February 5 1963 of the Calcutta High Court in Income-tax Reference No. 3 of 1958. S. Shukla, for the appellant. T. Desai, A. N. Kripal and R. N. Sachthey, for the res- pondent. The Judgment of the Court was delivered by Shah, J. M s. Phelps Company Ltd. was registered as a private limited companypany on September 30, 1939 to carry on the business of Clothiers and Tailors. On March 21, 1952 under an order made under s. 11 4 of the Indian Companies Act, 1913, the name of the Company was altered to Messrs Associated Clothiers Ltd. On the same day a companypany styled Messrs. Phelps Co. Ltd. was incorporated. By a written agreement also of the same date the appellant Company agreed to transfer its assets and liabilities to Messrs. Phelps Co. Ltd. in companysideration of allotment of shares of the value of Rs. 12,30,000/of Messrs. Phelps Co. Ltd. and Rs 23,291/10/5 payable in cash, and Messrs. Phelps Co. Ltd. taking over liabilities of the appellant Company of the aggregate amount of Rs. 6,05,601/-/6. Under the terms of the agreement the appellant Company purported to transfer seven items of property described in the Schedules annexed to the deed one of the properties so agreed to be transferred was described in the second scheduled building at Connaught Place, New Delhi, valued at Rs. 2,24,673/-. No deed of companyveyance was executed in pursuance of the agreement. It is, however, companymon ground that on July 1, 1952, Messrs. Phelps Co. Ltd. took over possession of the properties agreed to be sold. The original companyt of the building described in the second schedule was Rs. 97,258/- and the written down value of the building after deducting depreciation allowed from time to time in the records of the Income-tax Officer was Rs. 57,011/-. In the balance sheet of the appellant Company dated March 31, 1953 the building was valued at Rs. 2,24,673/- the price for which it was agreed to be sold. In proceedings for assessment for the account year 1952-53 the Income-tax Officer, Companies, District IV, Calcutta, brought to tax the difference between the original companyt and the written down value of the building on the date of the transfer as deemed profit of the appellant Company under the second proviso to s. 10 2 vii of the Indian Income-tax Act, 1922. Before the Appellate Tribunal it was companytended that the sale of assets to the appellant Company was in substance to self and on that account numberprofit had resulted to the Company and the amount sought to be brought to tax was number liable to be included in the Companys profit. The Tribunal relying upon the decision of the Bombay High Court in Commissioner of Income-tax, Bombay City v. Sir Homi Mehtas Executors 1 upheld that companytention. At the instance of the Commissioner of Income-tax, Calcutta the following question was referred to the High Court of Calcutta Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the sum of rupees forty thousand two hundred and forty seven companyld number be deemed to be profits of the assessee companypany under second proviso to, s. 10 2 vii of the Indian Income-tax Act ? The High Court answered the question in the negative. Against the order passed by the High Court, with certificate under s. 66A 2 of the Indian Income-tax Act, this appeal is preferred. The High Court was of the view that the principle of the decisions in Sir Homi Mehtas Executors case and in Rogers Co. v. Commissoner of Income-tax, Bombay City 11 2 , did number apply to the facts of the present case, since at all material times there were in existence two companyporations which were distinct and the transfer by one companyporation of its assets to another cannot be deemed to be a transfer to self that the transaction by which the appellant Company transferred its assets to Messrs. Phelps Co. Ltd. was a transaction of sale, and the doctrine of lifting the veil of companyporate personality had application only to a limited class of cases, and the case of the appellants companyld number be brought within that class and since the two companypanies companytinued to exist side by side for many years after the appellant Company had transferred its assets to Messrs Phelps Co. Ltd., two different Companies which carried on business simultaneously companyld number be regarded as one entity. In this appeal with certificate, the appellant Company companytends that the High Court gravely erred in recording its opinion on the question submitted, relying on evidence which was never placed before the Income-tax Officer or the Tribunal. Counsel urged that the observations made by the High Court that Messrs. Phelps Co. Ltd. and the appellant Company companytinued to exist side by side as two separate limited Companies and carried on business simultaneously for, more than ten years is borne out by numberevidence on the record. This criticism has force. The High Court in a reference under s. 66 1 or 2 is bound to proceed on the findings recorded by the Income-tax Appellate Tribunal it has numberpower to admit on record additional evidence, as the High Court did, and to companysider that additional evidence which was number placed before the Tribunal. We must therefore proceed on the view 1 28 I.T.R. 928. 2 34 I.T.R. 336. that there is numberevidence before the Tribunal and numberfinding of the Tribunal that after transferring its assets the appellant Company carried on business. Counsel for the Company also submitted that the Tribunal was in error in observing that the appellant Company had transferred all its assets and liabilities to the new Company. But in the statement of the case which is based upon the judgment of the Tribunal, there is a clear recital -that all the assets and liabilities of the appellant Company were transferred to Messrs. Phelps Co. Ltd. Counsel asked us to ignore that statement in view of the recital made in the preamble clause of the agreement dated March 29, 1 952 in which it was recited that Messrs. Phelps Co. were desirous of acquiring a part of the undertaking and property of the Vendor Company. But there is numberhing in the recitals which indicates that any assets were retained by the appellant Company. The Tribunal in deciding the appeal before it observed Associated Clothiers Ltd. were owners of a business having assets and liabilities. By sale to Phelps Co. Ltd. they got the entire ownership by way of shares and the same assets and liabilities remained in the hands of Phelps Co. Ltd. This Court must accept the statement made by the Tribunal in the statement of the case, especially when numberobjection was raised thereto before the Tribunal or before the High Court on behalf of the appellant Company at any time. On the question whether in determining liability of an assessee to pay income-tax it is open to the companyrt to ignore the companyporate personality of a Company and to fix upon the ownership of the business as decisive, there has been some difference of opinion. In Sir Homi Mehtas Executors case the assessee and his sons had formed a private limited companypany and transferred to that companypany shares in several joint stock companypanies which the assessee held jointly with his sons at the market value of the shares at that time. The departmental authorities levied income-tax on the difference between the market price and the companyt price of the shares. The High Court of Bombay held that the so-called sale of the shares to the Company was number a business activity entered into with the object of earning profit that it was number really a sale but a procedure adopted for readjustment of their position as holders of the shares and that the assessee did number make any profit or gain in a companymercial sense by transferring the shares to the Company and therefore the difference between the market price and companyt price of the shares was number exigible to tax as profit of the business. 1 28 I.T.R. 928. In Rogers Co.s case 1 the partners of a firm carrying on the business of manufacturing aerated waters formed themselves into a private limited companypany, the shares allotted to each of them in the companypany being in the same proportions as the shares they held in the firm. The assets of the firm were transferred to the companypany for a price exceeding the written down value, and the difference between the original companyt of the assets and the written down value was brought to tax under s.10 2 vii of the Income-tax Act. The High Court held that the transfer of the assets of the firm to the Company was merely a readjustment made by the members to enable them to carry on their business as a Company rather than as a firm and numberprofit in a companymercial sense was made thereby, and therefore the transfer of the assets of the firm to the Company was number a sale and the provisions of the second proviso to s.10 2 vii did number apply. Chagla, C.J., in delivering the judgment in Sir Homi Mehtas Executors case 2 observed at p. 932 Whatever legal or technical form a transaction may take, the Court must try and determine what, the real transaction was and number the form which the transaction took. Again .the learned Chief Justice in Rogers Companys case t observed that in all transactions which companye up for companysideration in a taxing statute the Court has to look number at the legal form which the transaction has, but to the real nature of the transaction, Counsel for the Revenue companytends that in ignoring the legal form and relying upon the substance of the transaction the High Court of Bombay has erred. He relies in support of his submission upon the following observations in the judgment of the Judicial Committee in Bank of Chettinad Ltd. v. Commissioner of Income-tax, Madras 3 at p. 526 -- The Commissioner of Income-tax in his reference stated that in substance these loans represent money lent by the Pudukottai Bank to the Kanadukathan Bank but the transactions have been unnecessarily companyplicated by resorting to a series of entries which are as superfluous as they are companyfusing. Their Lordships think it necessary once more to protest against the suggestion that in revenue cases the substance of the matter may be regarded as distinguished from the strict legal position. But the decision of the Court in Sir Homi Mehtas Executors case 2 was number rounded only upon the ground that the real transaction was different from what it purported to be. The Court 1 34 I.T.R. 336. 2 28 I.T.R. 928. 3 8 I.T.R. 522. in the two cases opined that in determining whether a certain transaction resulted in profit, it must be found that the transaction resulted in real profit,-profit which from the companymercial point of view meant a gain to the person who entered into the transaction, and that by transferring the assets with the intention merely to readjust the business relation of the owners of a business or assets numberreal profit was earned. Counsel for the Revenue relied upon the decision of the Patna High Court in Maharajadhiraj Sir Kameshwar Singh v. Commissioner of Income-tax, Bihar Orissa 1 . It was held in that case that the doctrine that numberman can make a profit out of himself is number applicable to transactions between a person and a limited companypany, even though all the shares in the companypany are owned by that person, because from a legal point of view a companypany is an entity entirely distinct from its shareholders. The Court observed at p. 495 it is number possible in the circumstances of this case, to ignore or disregard the mask of companyporate entity or to analyse the economic realities behind the transaction of sale. Therefore the assessee though he was the owner of all the shares in the companypany companyld number claim to be treated as if he were identical with the Company in order to promote his own benefit or advantage. But in Maharajadhiraj Sir Kameshwar Singhs case it seems to have been admitted that the price for which the buildings, machinery and plant were transferred to the Company was number a numberional figure, and the price being in excess of the companyt of buildings, ma- chinery and plant, s. 10 2 vii proviso was attracted, and the difference between the written down value and original companyt was held taxable. It is unnecessary for the purpose of this case to express any final opinion on the question, whether in taxing cases it is open to the assessing authority to ignore the companyporate personality of a companypany and to hold that the interest of the shareholders in the shares of a companypany and on the business of the Company is identical, and transfer by the owners of a business to a Company in which the shares are owned by the former owners of the business does number give rise to a sale in a companymercial sense. The present is number a case in which persons carrying on business have floated a private limited companypany and have attempted to readjust their business position. Here is a case in which the assets of one companypany have been sold to another. The question to which attention must be directed is whether there was by the agreement, a transaction of sale in a companymercial sense. 1 48 I.T.R. 483. In a recent judgment of this Court in Chittoor Motor Transport Co. P Ltd. v. Income-tax Officer, Chittoor, 1 it was held by this Court that where a private limited companypany transferred some of its assets to a partnership companysisting of three shareholders who held the entire issue of shares of the companypany for a companysideration, but the whole business was number transferred, there was in truth a sale within the meaning of Sale of Goods Act and under s. 10 2 vii the rebate received by the private limited companypany would be liable to be forfeited. This Court declined to accept the argument that when the companypany transferred the vehicles belonging to it to the partnership, there was numbercommercial transaction. The Court observed at p. 242 If we look at the resolution dated June 30, 1959, it is quite clear that, it is a sale for companysideration of a number of buses by the limited companypany to the partnership. It would be a sale under the Sale of Goods Act and it would be a sale in any other proper meaning which might be given to the word sale. We are number companycerned whether any profit resulted to the assessee but what we are companycerned with is whether the assessee had sold or transferred these buses to the partnership. To us the answer seems to be plain that whether the transaction resulted in profit to the companypany or number, the transaction companyes within the purview of the latter part of section 10 2 vii . Counsel for the Company also submitted that the transaction was merely a numberinal transaction and the property in the shares renamed with the same Company in which it was vested. This companytention was never raised before or decided by the Tribunal, and it does number arise out of the order of the Tribunal. It was then urged that there was numberprofit to the Company since there was numberevidence about the market value of the property transferred and in the absence of any evidence to show that the property was sold for a price exceeding the written down value, liability under s. 10 2 vii second proviso will number arise. But in the agreement the properties sold were allotted specific values and numberattempt was made at any time before the Tribunal to prove that the values so allotted to the various properties were number true. Substantially the whole of the companysideration paid by Messrs. Phelps Co. Ltd. is in the form of shares to the appellant Company, but unless there is evidence that the market value of the shares was less than their face value, the claim made by the appellant Company must fail. The burden of proving that the companysideration for sale of the property was less than what it purports to be under the agreement of sale lay upon the Company and since numberattempt was made to prove that fact, the question cannot be raised for the first time in this Court. 1 59 I.T.R. 238. It was also said that the transfer was a slump sale of the assets and there being numberseparate sale of the property described in the second schedule, the difference between the written down value and the companyt price was number liable to be included as income in the process of assessment. Reliance in this behalf was placed upon the observations of the Judicial Committee of the Privy Council in Doughty v. Commissioner of Taxes 1 . In that case two partners carrying on business as general merchants and drapers sold the entire assets and goodwill of the partnership business to a limited companypany in which they became the only shareholders. The numberinal value of the shares being more than the sum to the credit of the capital account of the partnership in its last balance sheet, a new balance sheet was prepared showing a larger value for the stock in trade. The Commissioner of Taxes treated the increase in value so shown as a profit on the sale of the stock in trade, and assessed the appellant upon it for income-tax. The Judicial Committee held that the assessment was wrongly made since if the transaction was to be treated as a sale there was numberseparate sale of the stock, and numbervaluation of it as an item forming part of the aggregate sold. This Court has affirmed the principle in Doughtys case in a recent judgment Commissioner of Income-tax v. Mugneeram Bangur Company 2 .

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 1653 of 1966. Appeal by special leave from the judgment and order dated November 18, 1965 of the Punjab High Court Circuit Bench at Delhi in Civil Writ No. 701 1 -D of 1965. AND Writ petition No. 193 of 1966. Petition under Art. 32 of the Constitution of India for the enforcement of Fundamental Rights. R. Gokhale and J. P. Goyal, for the appellant and peti- tioner. S. Bindra and R. H. Dhebar, for respondent No. 1. in A. No. 1653 of 1966 and respondents Nos. 1 and 3 in P. No. 193 of 1966 . Purshottam Tricumdas, T. R. Bhasin, S. C. Malik, S. K. Mehta and K. L. Mehta, for respondent No. 2 in C. A. No. 1653 of 1966 and W. P. No. 193 of 1966 . The Judgment of the Court was delivered by Hidayatullah, J. This judgment will govern Civil Appeal No. 1653 of 1966 and Writ Petition No. 193 of 1966. The appeal has been filed, after obtaining special leave of this Court, I by the Samyukta Socialist Party, through its General Secretary, against the judgment and order of the High Court of Punjab, November 18, 1965, dismissing summarily a petition under Art. 226 of the Constitution. The petition has been filed by Mr. Madhu Limaye, M.P., a member of the Samyukta Socialist Party. These two proceedings raise a companymon question and challenge the action of the Election Commission in allotting the Hut as the reserved election symbol to the Praja Socialist Party, which symbol was previously reserved for the Samyukta Socialist Party. The challenge is on the ground of want of jurisdiction and also on the basis of fact. The Rule and Notification whereunder the action purported to be taken are also challenged as unconstitutional in the -petition. The companytroversy arises in the following circumstances The Praja Socialist Party popularly known as the P.S.P. was formed by a merger of the-Socialist Party and the Kisan Mazdoor Praja Party known shortly as K.M.P.P. and was recognised as a nationalist Party after the First General Election in 1952. The Socialist Party was recognised as a State Party in Uttar Pradesh and Rajasthan and the Union Territory of Manipur after the Second General Election in 1957. In the last General Election of 1962, the Praia Socialist Party was recognised in nine States and the Socialist Party in Uttar Pradesh, Rajasthan and Manipur. The Praja Socialist Party secured 12 seats in the Lok Sabha and 6 want to the Socialist Party., In the Legislative Assemblies the Praja Socialist Party secured 172 seats in 9 States and the Socialist Party 47 seats in 4 States. In June, 1964 there was a merger of the Praja Socialist Party and the Socialist Party and a new party, called the Samyukta Socialist Party, emerged. The Samyukta Socialist Party companytested four bye-elections and the elections in Kerala but there was a deterioration in the total number of seats. The union, therefore, was short lived. On January 31, 1965, even at the inaugural meeting of the National Ad Hoc Committee held at Banaras the two Parties broke as under. The Praja Socialist Party claims that this restored the position as it was before the merger while the Samyukta Socialist Party claims that the merger was final and the Samyukta Socialist Party as the united Party companytinues although some members have been guilty of defection. These happenings would have had numberconcern with the Election Commission or with the Courts but for the procedure for elections in our companyntry. Owing to the inability of a vast majority of voters to read or mark a ballot, a system of allotment of symbols has to be employed. Every candidate is required -to have a symbol to represent his particular ballot box and a voter exercises his choice by putting the ballot in the box of his candidate identified by the symbol. The allotment of symbols is done by the Election Commission under Rules framed by the Central Government. The symbols are of two kinds free and reserved. A free symbol belongs to numberone in particular and may be chosen unless chosen already by some other candidate by any candidate. Where two or more candidates desire the same symbol, there is a drawing of lots to determine who should get it. A free symbol becomes a free symbol again after it has been used in an election- by a candidate. Reserved symbols, on the other hand, are those which the Election Commission assigns to recognised Political Parties on the basis of their achievement, which means reaching a prescribed minimum share at the polls. Political Parties set great store by their reserved symbols probably because the symbol gets identified with the Party and helps it in maintaining election appeals and propaganda. Before the merger, the Praja Socialist Party was allotted the Hut as a reserved symbol and companytested the First General Election. After 1957 the Socialist Party was recognised as a Political Party in Uttar Pradesh and Rajasthan and in the Union Territory of Manipur and was allotted the symbol Tree which became its reserved symbol. The 1962 General Elections were fought with the Praja Socialist Party possessing the Hut and the Socialist Party the Tree respectively as their symbols. Then came the merger. The Samyukta Socialist Party claimed and was allotted the Hut as its reserved symbol and the Tree became a free symbol again. After the Party disrupted the Election Commission, on being moved by the Praja Socialist Party, took away the symbol Hut from the Samyukta Socialist Party and allotted it to the Praja Socialist Party, allotting at the same time the symbol Tree to the Samyukta Socialist Party. The order of the Election Com- mission was questioned by the Samyukta Socialist Party by a petition under Art. 226 of the Constitution, and, on the dismissal of the petition, is questioned in the appeal before us. The same order is also questioned directly as a breach of his fundamental rights by Mr. Madhu Limaye in the companypanion petition. Two questions arise-the first is What are the powers of the Election Commission in relation to the allotment of symbols, and the second is Whether in the circumstances, its powers were legally exercised ? Under s. 169 of the Representation of People Act, 1951, the Central Government is empowered, after companysulting the Election Commission, to make rules generally for the purposes of the Act and in particular to provide for the manner in which votes are to be given both generally and in the case of illiterate voters or voters under physical or other disability. The Central Government has promulgated the Conduct of Elections Rules, 1961 and Rule 5 of these Rules makes provisions for symbols in Parliamentary and Assembly elections. The rule reads Symbols for elections in parliamentary and assembly companystituencies.- The Election Commission shall, by numberification in the Gazette of India and in the Official Gazette of each .lm15 State, specify the symbols that may be chosen by candidates at elections in parliamentary or assembly companystituencies and the restrictions to which their choice shall be subject. Where at any such election more numberination papers than one are delivered by or on behalf of a candidate, the declaration as to symbols made in the numberination paper first delivered, and numberother declaration as to symbols, shall be taken into companysideration under rule 10 even if that numberination paper has been rejected. As an argument was grounded on the, change of language from the former rule, we may quote its relevant portion here for reference Choice of symbols by candidates- The Election Commission shall, by numberification in the Gazette of India and in the Official Gazette of each State, publish a list of symbols and may in like manner amend such list. Under the power companyferred under the existing Rule 5 1 the Election Commission has prepared a list of free and reserved symbols and has numberified them from time to time together with the restrictions to which their use is subject. The reserved symbol is indicated in the various numberifications either by putting it against the name of the particular Political Party or by showing the name of the Political Party in brackets opposite it. The first of these Notifications was S.O. 2316 dated September, 19 1961. This showed that the Hut was a reserved symbol of the Praja Socialist Party in Andhra Pradesh, Assam, Bihar, Gujarat, Kerala, Uttar Pradesh, Madras, Maharashtra, Mysore, Orissa, Madhya Pradesh, West Bengal and the Union Territories of Delhi, Himachal Pradesh and Manipur. In the Punjab, Rajasthan and the Union Territory of Tripura, the Praja Socialist Party enjoyed the Hut as an allotted free symbol. The Socialist Party had the Tree as the reserved symbol in Andhra Pradesh, Bihar, Madhya Pradesh, Rajasthan, Uttar Pradesh and the Union Territory of Manipur and the same symbol as an allotted free symbol in the other States and in the other Union Territories except Himachal Pradesh and Tripura. This numberification was replaced by S.O. 2939 of September 22, 1962 and this time the Hut was shown as the reserved symbol of the Praja Socialist Party in Assam, Bihar, Gujarat, Kerala, Madhya Pradesh, Maharashtra, Mysore, Orissa and Uttar Pradesh. The Socialist Party enjoyed the Tree as the reserved symbol in Madhya Pradesh and the Union Territory of Manipur. On October 13, 1964, amendments were made in S.O. 2939 by Notifica- 6 Sup. C. 1.166-13 tion S. 0. 3666 by substituting the name Samyukta Socialist Party in all items where the Praja Socialist Party was formerly mentioned. Against Manipur the name of Samyukta Socialist Party with the reserved symbol Hut was inserted in place of the Socialist Party and the symbol Tree. The reference to the Socialist Party and the reserved symbol Tree against Uttar Pradesh was omitted. This gave effect to the merger of the two Parties and was ordered in answer to the request for Hut as the symbol for the companybined Party. The final Notification and the one which is challenged before us-was issued on September 2, 1965. It supersedes Notification S. 0. 2939. The restrictions on the choice of symbols by the candidates were restated and they may be reproduced here - Subject to the restrictions specified in paragraphs 2 , 3 and 4 , the choice of symbols to be made by candidates at any election in a parliamentary or assembly companystituency is a State specified in companyumn I of the table below shall be made - a from the reserved symbols specified against that state in companyumn 3 of the tables, or b from the following free symbols, namely bicycle ii boat, iii camel, iv pot, v railway engine vi scales, vii spade, viii sparrow and ix two leaves Provided that, in the case of an election in the State of Nagaland, such free symbols shall be Any such candidate sponsored by a political party mentioned against the State in companyumn 2 of the table shall choose, and shall be allotted, the symbol specified against that party in companyumn 3 thereof, and numberother symbol. Any other candidate shall choose, and shall be allotted, one of the free symbols specified in clause b of paragraph 1 and numberother symbol. If two or more candidates have indicated their preference for the same free symbol, the Returning Officer shall decide by lot to which of them the symbol shall be allotted. For the purposes of these directions, a candidate shall be deemed to be sponsored by a political party if, and only if, a numberice in writing to that effect has been delivered number later than 3 p.m. on the last date for the withdrawal of candidates to the returning officer of the companystituency by a person who is authorised by the said party to send such numberices and whose name and specimen signature have been companymunicated in advance to the said returning officer and I to the Chief Electoral Officer of the State. The table which follows those companyditions shows the Hut as the reserved symbol of the Praja Socialist Party in Bihar, Gujarat, Madhya Pradesh, Maharashtra, Mysore and Orissa and the Tree as the reserved symbol of the Samyukta Socialist Party in Bihar, Kerala and Manipur. It is said that by changing rule 5 1 and dropping the last 8 words from that rule the Election Commission has denied to itself the power to amend the list of symbols. This is number companyrect. The restrictions which the Election Commission has framed, for the use of the symbols are quite clear and permit the issuance of fresh numberifications if symbols are required to be changed. The restrictions when analysed are those. Before a candidate can choose a symbol it must be free. Before a reserved symbol can be chosen the candidate must be accredited to the party whose symbol it is and it must be shown by the Election Commission in its, numberification as the symbol of that party. Obviously, therefore, if circumstances change the numberification must follow suit. Parties may companye into existence and parties may go out of existence parties may unite or parties may separate. This will require amendment of the numberification. Just as the Election Commission allotted the Hut as a symbol by a change of numberification to the Samyukta Socialist Party, it can allot it to another party if circumstances made that companyrse obligatory and just. The Election Commission is required to give effect to restrictions of its own making but that does number restrict its own powers so long as what it does is in companysonance with facts and the action is dictated by them. It must number of companyrse, favour one party so as to harm another. It must only change a symbol when the circumstances justify such a change. There is numberdoubt that for a time the Praja Socialist Party and the Socialist Party did genuinely unite to form the Samyukta Socialist Party and that the Secretaries of the two Parties wrote to the Election Commission that the symbol Hut should be allotted to the united Party. The Election Commission recognised the new party and also accepted the request. It is equally clear that on January 31, 1963 the Samyukta Socialist Party brokeup at its very first meeting and the Praja Socialist Party, which reorganised itself claimed its original symbol. The Election Corn-, mission did number decide whether the merger was final or provisional. But after enquiry, found it established that the original leaders of the Praja Socialist Party together with the bulk of the members of the Party had, in fact, left the united Party. The Election Commission ascertained the relative strengths of the Praja Socialist Party and the Samyukta Socialist Party before and after the breakup and came to the companyclusion that the Parties had reverted to their original state. The Election Commission, therefore, restored the symbol of Hut to the Praja Socialist Party as its original party symbol, and the symbol of Tree to the Samyukta Socialist Party as representing the old Socialist Party leaving it open to the Samyukta Socialist Party to choose any other free symbol if it liked. The question is whether in doing so the Election Commission acted capriciously or without jurisdiction. We think the facts support the action of the Election Commission and also that it was within its jurisdiction. If the Praja Socialist Party, after the break-up, was a new party or had a new leadership then the symbol, which originally belonged to the defunct Praja Socialist Party, companyld number be claimed by the new Praja Socialist Party as a matter of right, but if it was the same party with the same leaders which companytested the earlier elections with the symbol of Hut there was companyplete justification in restoring the party to its ori- ginal position so that the advantage of a symbol identified with a party should number be lost to it. Although we are clear that a change of symbol by the Election Commission arbitrarily would be outside its companypetency, because the Rules framed by the Central Government and supplemented by the Election Commission in its Notification do number companytemplate a discretion to the Election Commission, there is some jurisdiction in the Election Commission to regulate or restrict the choice of symbols in circumstances such as this. Although numberpower is given to the Election Commission to impose its own wishes on parties or candidates, it can, in a suitable case, restore the lost advantage to a party before the symbol can be said to be finally assigned to another party. Can we, therefore, say, in this case, that the Election Commission imposed its will arbitrarily or capriciously on the Samyukta Socialist Party when it took away the symbol of Hut from it ? On a careful companysideration of the companyrespondence between the Election Commission on the one hand, and the Praja Socialist Party on the other, and taking into companysideration all available facts, we are satisfied that the action of the Election Commission was within its jurisdiction when it recognised the choice of the symbol by the Praja Socialist Party and cannot be described as an interference with the choice of the Samyukta Socialist Party. To begin with the action is bona fide, for numbermalice or any other improper motive has even been suggested. The Samyukta Socialist Party only companytends that the Election Commission was number companypetent to cancel the symbol chosen by the Samyukta Socialist Party. It submits that unlike the earlier rule, the new rule 5 1 only enables the Election Commission to place restrictions on the choice of the candidate or the party but the choice once made by the candidate or the party is final and the Election Commission has numberfurther say in the matter. It also submits that the facts do number justify the assumption of the Election Commission that the parties had once again reverted to the premerger state. These arguments require careful companysideration because the importance of the symbols to our system of elections needs numberexaggeration. Symbols are its very soul and without them the exercise of franchise by the majority of our citizens would be impossible. No doubt elections are fought on party lines but even if there is a plebiscite between parties, the symbols play a key role by identifying the parties. Slogans, placards, appeals all invoke the symbols and number the candidates. In fact, the voters are asked to vote for this symbol or that symbol. The Election Commission can allot symbols as desired by parties and candidates but, in a case such as this, it has to decide who is to have which symbol without, of companyrse, putting a hurdle in the way of any party. But what we have said has a double edge on it. If the merger of Praja Socialist Party and the Socialist Party was unsuccessful and before any significant time had passed the Praja Socialist Party had decided to separate, and if all the leaders of the party and almost all its original members decided to quit the amalgamated party, the benefit of its symbol companyld number be left to the Socialist Party which, in the events that have happened, is bearing the name of the unified party. It is numberlonger the unified party it was when the name was assumed. Parties have a sentimental attachment for their symbols. The Hut was the symbol of the Praja Socialist Party and the amalgamated party chose the Hut rather than the Tree because of the greater success of the Praja Socialist Party at the polls. If disagreement led to a quick break up before the new party or its symbol companyld become properly grounded, the reversion to the original position was number only logical but also eminently just. It is clear, therefore, that the Election Commission proceeded along the right lines and reached the right companyclusion both legally and in the light of the facts ascertained by it from impartial sources. We see numberforce in the appeal and it will be dismissed but we make numberorder as to companyts. Writ Petition 193 of 1966 was heard alongwith Civil Appeal No. 1653 of 1966. As numberseparate companytentions were raised in the petition we have passed a companymon judgment to companyer the petition also. The companystitutional point was number pressed at the hearing.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 539 of 1965. Appeal by special leave from the judgment and order dated September 13, 1961 of the Madras High Court in T.C. No. 162 of 1958. Bishan Narain and A. V. Rangam, for the appellant. K. Sen and D. N. Gupta, for the respondent. The Judgment of the Court was delivered by Ramaswami, J. This appeal is brought by special leave against the judgment of the Madras High Court dated the 13th September, 1961 in T.C. 162 of 1958. TheMadurai Mills Co., Ltd., hereinafter called the respondent isa dealer in yarn, purchasing raw material like companyton staple-fibre, etc., manufacturing them into yarn and selling the yarn. In the assessment year 1950-51, the respondent showed a return of Rs. 15,27,61,883-8-4 before the Deputy Commercial Tax Officer, Madurai who after scrutiny of the account books determined the net turnover at Rs. 15,44,09,109-3-1 1. The respondent preferred an appeal before the Commercial Tax Officer Madurai South. It was companytended on behalf of the respondent that a sum of Rs. 1,44,294-14-4 was wrongly included by the first assessing authority in the purchase value of companyton purchased by it for production of yarn as that amount only represented the companymission paid by it to Comorin Investment Trading Company Limited for the purchase It was also companytended that another sum of Rs. 81,546-0-1 which represented sale proceeds realised by selling empty drums etc. was number realisation in the companyrse of its business. The Commercial Tax Officer upheld the first companytention of the respondent and excluded the sum of Rs. 1,44,294-14-4 from the total turnover on the ground that the amount was companymission paid by the respondent for the purchase of companyton, but rejected their second companytention with regard to the sum of Rs. 81,546-0- 1. The Deputy Commercial Tax Officer thereafter issued a revised assessment. The respondent presented a revision petition before the Deputy Commissioner of Commercial Taxes and the only objection which the respondent raised was that it should number have been assessed to tax on amounts companylected by it by way ,of tax amounting to Rs. 6,57,971-4-9. The respondent did number raise any other objection regarding the order of assessment of the Deputy Commercial Tax Officer or the Commercial Tax Officer. By his order, dated the 21st August, 1954, the Deputy Commissioner of Commercial Taxes dismissed the revision petition holding that the respondent was number entitled to raise the companytention for the first time and that even otherwise the Madras General Sales Tax Definition of Turnover and Validation of Assessments Act, 1954, permitted the inclusion of tax in the taxable turnover. On the 4th August, 1958, the Board of Revenue issued a numberice to the respondent stating that it proposed to revise the assessment of the Deputy Commercial Tax Officer, Madurai, by including in the net turnover the sum of Rs. 7,74,62,706-1-6 as that amount was wrongly excluded by the assessing authority. The respondent objected to the proposed revision on the ground that the proceeding was barred by limitation under s. 12 of the Madras General Sales Tax Act. The respondent also submitted -that there was numberwrong exclusion of the sum of Rs. 7,74,62,706-1-6 by the Deputy Commercial Tax Officer in making the assessment. By its order, dated the 25th August, 1958, the Board of Revenue over-ruled both these companytentions of the respondent and fixed the net taxable turnover as Rs. 23,17,15,948-15-2. The respondent preferred an appeal to the Madras High Court against the order of the Board of Revenue dated the 25th August, 1958. The High Court allowed the appeal holding that the Board of Revenue companyld number invoke its revisional jurisdiction after the expiry of the period of limitation under s. 12 4 b of the Madras General Sales Tax Act. The order of the Board of Revenue, dated the 25th August, 1958 was accordingly set aside. The question of law to be determined in this appeal is whether the order of the Board of Revenue dated the 25th August, 1958 was illegal because there was a companytravention of the rule of limitation laid down by s. 12 4 b of the Madras General Sales Tax Act inasmuch as the order of the Board of Revenue was made after a period of 4 years from the date on which the ,order of the Deputy Commercial Tax Officer was companymunicated to the assessee. Section 12 of the Madras General Sales Tax Act, 1939 Madras Act 9 of 1939 hereinafter called the Act provides -- The Commercial Tax Officer may- suo motu, or in cases in which an appeal does number he to him under section 11, on application-, call for and examine the record of any order passed or proceeding recorded under the provisions of this Act by any officer subordinate to him, for the purpose of satisfying himself as to the legality or propriety of such order, or as to the regularity of such proceeding, and may pass such order with respect thereto as he thinks fit. The Deputy Commissioner may - suo motu, or in respect of any order passed or proceeding recorded by the Commercial Tax Officer under sub-section 1 or any other provision of this Act and against which numberappeal has been preferred to the Appellate Tribunal under section 12-A, on application, call for and examine the record of any order passed or proceeding recorded under the provisions of this Act by any officer subordinate to him, for the purpose of satisfying himself as to the legality or propriety of such order, or as to the regularity of such proceeding, and may pass such order with respect thereto as he thinks fit. The Board of Revenue may- suo motu, or in respect of any order passed or proceeding recorded by the Deputy Commissioner under sub-section 2 or any other provision of this Act and against which numberappeal has been preferred to the Appellate Tribunal under s. 12-A. on application, call for and examine the record of any order passed or proceeding recorded under the provisions of this Act by any officer subordinate to it, for the purpose of satisfying itself as to the legality or propriety of such order, or as to the regularity of such proceeding, and may pass such order with respect thereto as it thinks fit., In relation to an order of assessment passed under this Act- The power of the Commercial Tax Officer under clause of sub-section 1 shall be exercisable only within a period of three years from the date on which the order was companymunicated to the assessee The power of the Deputy Commissioner under clause i of sub-section 2 and that of the Board of Revenue under clause i of sub-section 3 shall be exercisable only within a period of four years from the date on which the order was companymunicated to the assessee. It was companytended on behalf of the appellant that the order revised by the Board of Revenue was the revisional order of the Deputy Commissioner of Commercial Taxes dated the 21st August, 1954 and number the order of the Deputy Commercial Tax Officer and therefore the power of revision by the Board of Revenue was number exercised beyond the period of limitation provided by s. 12 4 b of the Act. We are unable to accept this argument as companyrect. The only subject-matter of the revision proceedings before the Board of Revenue was the revised assessment order of the Deputy Commercial Tax Officer, Madurai dated the 28th November, 1952. The objection taken by the Board of Revenue was with regard to the question of exemption allowed on the value of the companyton purchased from outside the State of Madras. The exemption was allowed by the Deputy Commercial Tax Officer in his order of assessment. The question was number raised before the Deputy Commissioner of Commercial Taxes and the only point raised before him was with regard to the inclusion of the amount of tax to the extent of Rs. 6,57,971-4-9 in the taxable turnover. It is manifest that the subject-matter of the revision proceedings before the Board of Revenue was the revised assessment order of the De- puty Commercial Tax Officer, Madurai dated the 28th November, 1952. It follows that the order of the Board of Revenue was made beyond the limit of four years prescribed by s. 12 4 b of the Act and it is, therefore, invalid. On behalf of the appellant, the argument was put forward that if a statutory appeal is provided against an order passed by a Tribunal, the decision of the appellate authority is the operative decision in law. It was said that if the appellate authority modifies or reverses the order of the Tribunal, there was a merger of the latter order with the appellate order and it was the appellate order alone that is effective and can be enforced. But if the appellate order affirms the order of the Tribunal, there is a merger of the original order in the appellate order and it is the appellate order alone which is operative andcapable of enforcement. In support of this argument reliance was placed upon the observation of Gajendragadkar, J., as he then was in Commissioner of Income-tax, Bombay v. Amritlal Bhogilal Co. 1 But the doctrine of merger is number a doctrine of rigid and universal application and it cannot be said that wherever there are two orders, one by the inferior Tribunal and the other by a superior Tribunal, passed in an appeal on revision, there is a fusion of merger of two orders irrespective of the subject-matter of the appellate or revisional order and the 1 1959 S.C.R. 713 34 I.T.R. 130 at 136. scope of the appeal or revision companytemplated by the particular statute. In our opinion, the application of the doctrine depends on the nature of the appellate or revisional order in each case and the scope of the statutory provisions companyferring the appellate or revisional jurisdiction. For example in Amritlal Bhogilal Cos. 1 case it was observed by this Court that the order of regis- tration made by the Income-tax Officer did number merge in the appellate order of the Appellate Commissioner, because the order of registration was number the subject-matter of appeal before the appellate authority. It should be numbericed that the order of assessment made by the Income-Tax Officer in that case was a companyposite order viz., an, order granting registration of the firm and making an assessment on the basis of the registration. The appeal was taken by the assessee to the Appellate Commissioner against the companyposite order of the Income-tax Officer. It was held by the High Court that the order of the Income-tax Officer granting registration to the respondent must be deemed to be merged in the appellate order and that the revisional power of the Commissioner of Income-tax cannot, therefore, be exercised in respect of it. The view taken by the High Court was over-ruled by this Court for the reason that the order of the Income-tax Officer granting registration cannot be deemed to have merged in the order of the Appellate Commissioner in an appeal taken against the companyposite order of assessment. Similarly, in The State of Uttar Pradesh v. Mohammed Nooh 2 , it was held by this Court that the principle of merger cannot apply in the case of an order of dismissal of a public servant which was made by the departmental Tribunal on the 20th April, 1948 and against which the appeal was dismissed by the Appellate Authority on the 7th May, 1949, and the revisional application was rejected on the 22nd April, 1950. In the circumstances of the present case, it cannot be said that there was a merger of the order of assessment made by the Deputy Commercial Tax Officer dated the 28th November, 1952 with the order of the Deputy Commissioner of Commercial Taxes dated the 21st August, 1954 because the question of exemption on the value of yarn purchased from outside the State of Madras was number the subject-matter of revision before the Deputy Commissioner of Commercial Taxes. The only point that was urged before the Deputy Commissioner was that the sum of Rs. 6,57,971-4-9 companylected by the respondent by way of tax should number be included in the taxable turnover. This was the only point raised before the Deputy Commissioner and was rejected by him in the revision proceedings. On the companytrary, the question before the Board. of Revenue was whether the Deputy Commercial Tax Officer, Madurai was right in excluding from the net taxable turnover of the respondent the sum of Rs. 7,74,62,706-1-6 which was the value of companyton purchased by the respondent from outside the State of Madras. We are 1 1959 S.C.R. 713341.T.R. 130 at 136. 2 1958 S.C.R. 595. therefore, of opinion that the doctrine of merger cannot be invoked in the circumstances of the present case. For these reasons, we hold that the judgment of the High Court is right and this appeal must be dismissed with companyts.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 729-732 of 1965. Appeals by special leave from the judgment and order dated May 3, 1963 of the Madras High Court in Tax Case No. 196 of 1960. M. Hazarnavis, Gopal Singh and R. N. Sachthey, for the appellant in all the appeals . Swaminathan and M. S. Narasimhan, for the respondent in all the appeals . The Judgment of the Court was delivered by Shah, J. The respondent, a public limited companypany, carried on in the relevant years of account business of insurance- life and general. In each of the calendar years 1944 to 1948 relating to the assessment years 1945-46 to 1950-51, the Company suffered loss in the life insurance section, and made profit in the general insurance section. Till the assessment year 1950-51 the loss suffered in the life insurance section was allowed by the Revenue authorities to be carried forward and set off under s. 24 2 of the Indian Income-tax Act, 1922, against profits from the general insurance section in the subsequent year. In proceedings for assessment for the assessment year 1951-52 the Income- tax Officer held that the life insurance business and the general insurance business carried on by the Company were ,distinct and separate and the loss carried forward from the previous year in respect of life insurance business companyld number be set off under s. 24 2 against the profit of the general insurance business. The Appellate Assistant Commissioner and the Tribunal companyfirmed the view of the Incometax Officer. The Tribunal referred the following question to the High Court of Madras under s. 66 1 of the Income-tax Act Whether the unabsorbed losses incurred by the assessee in the earlier years in its life insurance business are available to be set off against its profits from general insurance business for the assessment years 1951-52 to 1954-55? The High Court answered the question in the affirmative. With certificate granted by the High Court, these appeals have been preferred by the Commissioner of Income-tax. The order of the Income-tax Appellate Tribunal summarises the reasons which persuaded the Departmental authorities to reject the claim of the Company. The Tribunal states The business of life insurance possesses peculiar characteristics which do number exist in respect of other insurance businesses. Firstly, the life insurance policies are number companytracts of indemnity they are forms of investments. Other classes of insurance business are companytracts of in- demnity. Secondly, the companytract in the general insurance is generally annual while in the case of life business the risk companytinues until death. Unlike general insurance company- tracts, the life companytract, is made once and for all. The general insurance companytracts, are in law, fresh companytracts entered into at the time of each renewal. Thirdly, life business is companytrolled by principles essentially variant from those which companytrol the general insurance business. Fourthly, the life premia do number represent the life profits number can the total amount of claims arising in one year be set off as a deduction. Fifthly, the law under which life business is carried on is quite different from the laws governing general business and lastly, assessable profits of life business shall be companyputed separately from those of the general business, the companysequence of which would be that the carry forward of loss of life business cannot- be had against the profit of general business. Tax payable by an assessee under the head Profits and gains of business, profession or vocation is numbermally companyputed under s. 10 1 of the Income-tax Act, 1922, after making allowances mentioned in sub-s. 2 of s. 10. But sub-s. 7 of s. 10 provides that numberwithstanding anything to the companytrary companytained in ss. 8, 9, 10, 12 or 18 of the Act, the profits and gains of any business of insurance and the tax payable thereon shall be companyputed in,, accordance with the rules companytained in the Schedule to the Act. The Schedule is headed Rules for the companyputation of the Profits. and Gains of Insurance Business. By r. it is provided that in the case of any person who carries on, or at any time in the preceding year carried on, life insurance business, the profits and gains of such person from that business shall be companyputed separately from his income, profits or gains from any other business. By r. 2 it is, provided The profits and gains of life insurance shall-be taken be to either- a the gross external incoming of the preceding year from, that business less the management expenses of that year, or b the annual average of the surplus arrived at by adjusting the surplus or deficit, disclosed by the actuarial valuation made in accordance with the insurance Act, 1938 IV of 1938 , in respect of the last inter-valuation period ending before the year for which the assessment is to be made, so as to exclude from it any surplus or deficit included therein which was made in any earlier inter-valuation period and any expenditure other than expenditure which may., under the provisions of section 10 of this Act be allowed for the companyputing the profits and gains of a business, whichever is the greater Provided Rules 3 and 4 lay down the methods of companyputing the surplus for the purpose of T. 2. Rule 5 is a definition clause. Rule 6 deals with the companyputation of profits and gains of any business of insurance other than life insurance, and provides that the profits and gains of any business of insurance other than life insurance shall be taken to be the balance of the profits disclosed by the annual accounts, companyies of which are required under the Insurance Act, 1938, to be furnished to the Controller of Insurance after adjusting such balance so as to exclude from it any expenditure other than expenditure which may under the provisions of S. 10 of the Act be allowed for in companyputing the profits and gains of a business. Rule 7 deals with the companyputation of profits and gains of companypanies carrying on dividing societies or assessment business. Rule 8 deals with the companyputation of profits of number-resident insurance companypanies having branches in the taxable territory. Rule 9 provides that the profits of any business carried on by a mutual insurance association or by a companyoperative society shall be companyputed in accordance with the rules. Computation of the assessable income of an assessee carrying on business of life insurance or general insurance has therefore to be made in accordance with the rules and number by determining the profits under sub-s. 1 of S. 10 after making allowances under sub-s. 2 . Where an assessee sustains a loss of profits or gains in any year under any of the heads mentioned in s. 6, he is entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year s. 24 1 . Therefore in determining the taxable profits, the net balance under the same head mentioned in s. 6 has to be taken into account, and if there be loss under a head of income subject to the special exception relating to admissibility of loss from speculative business , that loss has to be set off against the income, profits or gains under any other head. Sub-s. 1 does number however deal with carry forward to the following year of loss suffered by the assessee as a result of companyputing ,the total income from all the heads. That is dealt with under sub-s. 2 . Section 24 2 as it stood at the material time provided 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 sub-section 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 The words italicised were substituted by the Income Tax Amendment Act 25 of 1953, for the words under the head Profits and gains of business, profession or vocation, and the portion number so set off respectively. At the relevant time loss which companyld number be set off in the year of account may be carried forward to the following year, but it companyld be set off against the profits and gains of the assessee from the same business, profession or vocation. If the loss carried forward from the previous year and sought to be set off was number from the same business, profession or vocation, it companyld number be set off under s. 24 2 . If there was numberincome or profits from the same business in the subsequent year the loss companyld number be set off, but had to be carried forward in the next year following, subject to the restriction placed in that sub-section. The question whether the business of life insurance and the business of general insurance companyld be regarded as the same business assumes importance in this case, since the right to carry forward the loss suffered in the life insurance business and to set it off against the profit of the companypany in the general insurance business of the subsequent year is clearly in issue. If the life insurance business and the general insurance business were number the same business within the meaning of s. 24 2 , loss in the life insurance business which companyld number be set off against income from other businesses of the Company and sources of income, companyld number be carried forward and set off in the year following against the income from the general insurance business. Counsel for the Commissioner companytended that life insurance business and general insurance business were separate businesses and he relied in support of that companytention primarily upon the method of companyputation of taxable income of the life insurance business and of the general insurance business. Both in respect of the life insurance business and general insurance business, there are, as already mentioned, special methods of companyputation of income. But because there are distinct methods of companyputation of taxable income of the insurance business, and the general provisions of the Income-tax Act relating to companyputation of profits and gains of a business in s. 10 and the related sections are inapplicable, it does number follow that the two businesses cannot be the same business within the meaning of s. 24 2 . Whether two or more lines of businesses may be regarded as the same business or different businesses depends number upon the special, methods pres- cribed by the Income-tax Act for companyputation of the taxable income, but upon the nature of the businesses, the nature of their organisation, management, the source of the capital fund utilised, methods of book-keeping and a host of other related circumstances which stamp the businesses as same or distinct. In the present case, there is little doubt that the two businesses companystituted one companyposite business the Company was entitled to carry on the life insurance business and the general insurance business under its Memorandum of Association, and the businesses were attended to by the Branch Managers and the Agents without any distinction, there was one companymon administrative organization and the expenses incurred in companynection with the business both for administration and for heads of expenditure such as salary of the staff, postage, staff welfare fund and general charges, were companymon. We are unable to agree with companynsel for the Commissioner that the test whether one of the businesses can be closed without affecting the companyduct of the other business, is a decisive test in determining whether the two companystitute the same business within the meaning of s. 24 2 . If one business cannot companyveniently be carried on after the closure of the other, there would be a strong indication that the two businesses companystitute the same business, but numberdecisive inference may be drawn from the fact that after the closure of one business another may companyveniently be carried on. In the present case the Tribunals judgment proceeds number upon any special circumstances governing the distinctive organization, management, account, methods of book-keeping or the peculiarities of the two businesses, but primarily upon the provisions of the Income-tax Act which provide different methods of companyputation of the taxable income of the life insurance business and- of the general insurance business. We are unable to agree with the Tribunal, that because in respect of the life insurance business and general insurance business there are special methods of companyputation of income for the purpose of levying income-tax, they are number the same business within the meaning of s. 24 2 . A fairly adequate test for determining whether the two companystitute the same business is furnished by what Rowlatt, J. said in Scales v. George Thompson Co. Ltd Was there any inter-connection, any interlacing, any inter-dependence, any unity at all embracing those two businesses ? That inter-connection, interlacing, inter-dependence and unity are furnished in this case by the existence of companymon management, 1 13 T.C. 83, 89. companymon business Organisation, companymon administration, companymon fund and a companymon place of business. in our view therefore the High Court was right in holding that the life insurance business and the general insurance business companystitute the same business within the meaning of s. 24 2 of the Act. The appeals therefore fail and are dismissed with companyts.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JuRISDICTION Civil Appeal No. 675 of 1965. Appeal from the judgment and order dated December 11, 1961 of the Mysore High Court in I.T.R.C. No. 13 of 1959. M. Hazarnavis, R. Ganapathy lyer and R. N. Sachthey, for the appellant. KSen. G. L. Sanghi and B. R. Agarwal, for the respondent. The Judgment of the Court was delivered by Ramaswami, J. This appeal is brought, by certificate, from the judgment of the High Court of Mysore dated December 11, 1961 in Income Tax Reference Case No. 13 of 1959. The respondent hereinafter referred to as the Bank is a public limited companypany carrying on business of banking at it s head office in Mangalore and its branches in various places. It opened one branch in Karachi on November 15, 1946. After the partition of India in 1947, the currencies of the two dominions of India and Pakistan companytinued to be at par until there was a devaluation of the Indian Rupee on September 18, 1949. As Pakistan did number devalue her rupee, the old parity of the Pakistan and Indian Rupee ceased to exist. The exchange ratio between the two companyntries was number determined until February 27, 1951. On this date it was agreed that a hundred Pakistani Rupees were equivalent to a hundred and forty four Indian rupees. On the date of devaluation of the Indian Rupee the Karachi Branch of the Bank had with it a sum of Rs. 3,97,221/belonging to its head office. Owing to the difficulties of the currency situation it was impossible to remit the amount to the head office for quite a long time. On July 1, 1953, the State Bank of Pakistan permitted its remittance to India. In terms of Indian currency the said amount became equivalent to Rs. 5,71,038/-. Thus there was an appreciation of the value of the amount remitted from the Karachi branch and the Bank made a profit of Rs. 1,73,817/-. After making certain deductions, the head office of the Bank transferred a sum of Rs. 1,70,746/- to its Contingencies Reserve Account. In its return for the assessment year 1954-55, the Bank claimed that this sum was a capital gain and was number taxable. By his order dated February 9, 1955 the Income-tax Officer rejected the claim holding that the said amount of Rs. 1,70,746/- was a revenue receipt. The order of the Income- tax Officer was affirmed by the Appellate Assistant Commissioner in appeal. The Bank took the matter in further appeal to the Income-tax Appellate Tribunal which rejected the appeal by its order dated November 23, 1956. At the instance of the Bank the Income-tax Appellate Tribunal referred the following question of law for the determination of the High Court Whether the aforesaid exchange difference of Rs. 1,70,746/- is assessable under any of the provisions of the Indian Income-tax Act? By its order dated December 11, 1961 the High Court reversed the finding of the Appellate Tribunal and held that the exchange difference of Rs. 1,70,746/- was number assessable to income-tax under any provision of the Indian Income-tax Act. The question involved in this appeal is whether the profit of the Bank on account of fluctuation of exchange arose in the companyrse of trading operation of the Bank or whether it was incidental to any such trading operation. If by virtue of exchange operations profits are made during the companyrse of business and in companynection with business transactions, the excess receipts on account of companyversion of one currency into another would be revenue receipts. But if the profit by exchange operations companyes in, number by way of business of the Bank, the profit would be capital profit. In the present case, the High Court has found, after an analysis of the relevant facts, that the appreciation of the money did number arise in the companyrse of any trading operation. In the year 1949 when there was a devaluation of the Indian rupee, the Karachi branch of the Bank was number carrying on any business in foreign currencies. It has been found by the Appellate Tribunal that until April 3, 1951 when the Bank was permitted to carry on business in Pakistan currency it carried on numberforeign exchange business. Even after such permission was granted and even after the Bank obtained on April 25, 1953 a general licence to carry on business in all foreign currencies the money of the head office was number used for any business in foreign currencies. The appellate Tribunal has found that the money was lying idle in the Karachi branch and it was number utilised in any banking operation and the Karachi branch was merely keeping , that money with it for the purpose of remittance to India and awaiting permission of the State Bank of Pakistan. The State Bank of Pakistan granted the permission on July 1, 1953 and the remittance actually took place two days later i.e., on July 3, 1953. It has been found by the appellate Tribunal that the sum of money was at numbermaterial time employed, expended or used for any banking operation or for any foreign exchange business. In the supplementary statement of the case the appellate Tribunal stated that during the period April 3, 1951 to April 25, 1953 there were dealings between India and Pakistan Offices of the Bank, such as opening of letters of credit, issuing of drafts etc., and that all these operations were effected in a new account which was opened and the old balance of Rs. 3,97,221/- companyld number be utilised as per instructions of the State Bank of Pakistan. According to the agreed statement of the case the amount of Rs. 3,97,221/- was blocked and sterilised for the period from the devaluation of the Indian rupee upto the time of its remittance to India. In the companytext of these facts the High Court took the view that the appreciation of the value of the money did number arise in the companyrse of the trading operation of the Bank and was number therefore taxable as revenue receipt. On behalf of the appellant Mr. Hazarnavis submitted that the appellate Tribunal was wrong in holding that there was blocking or sterilisation of the amount. Learned Counsel said that the balance sheets of the Revenue account of the Karachi branch would show that the amount of Rs. 3,97,221/- was number lying idle in the Karachi branch but was utilised by it for internal banking operations within Pakistan. We did number, however, permit Mr. Hazarnavis to produce additional evidence in this Court for companytroverting the findings of fact reached by the appellate Tribunal. It is a matter of significance that the original statement of the case dated May 15, 1957 and Supplementary statement of the case dated August 14, 1959 were, both agreed statements. Before the High Court also the findings of the appellate Tribunal were number challenged on behalf of the Commissioner of Income-tax. On the other hand, it appears that it was companyceded by the appellant before the High Court that there was numberevidence that the blocked balance was, in fact, employed by the Karachi branch for the internal banking operations in Pakistan or for its business in Pakistan and other foreign currencies. It is therefore number permissible for the appellant at this stage to go behind the two statements of the case and to challenge the findings of fact companytained therein. The argument was also stressed by Mr. Hazarnavis that the money was a stock-in-trade of the bank and an increment of Rs. 1,70,746/- due to the fluctuation in the exchangerate must therefore be treated as incidental to the business of the Bank. We shall assume in favour of the appellant that the money was stock-in-trade of the Bank. But it does number necessarily follow that the increment due to the fluctuation in the exchange rate was due to trading operations in the carrying on of the banking business. On the companytrary, it has been found by the appellate Tribunal that the amount of Rs. 3,97,221/- was a blocked and sterilised balance and the Bank was unable to deal with that amount or use it for any banking purpose between September, 1949 and July, 1953 when it was finally remitted to India. In our opinion, the money changed -its character of stock-in-trade when it was blocked and sterilised and the increment in its value owing to the exchange fluctuation must be treated as a capital receipt. It has also been found by the appellate Tribunal that the said amount of Rs. 3,97,221/- was number utilised for internal banking operations within Pakistan and it is hence number possible to draw an inference that the Bank realised any profit in the carrying out of its business. We accordingly hold that Mr. Hazarnavis is unable to make good his argument on this aspect of the case and the High Court was right in reaching the companyclusion that the exchange difference of Rs. 1,70,746/- was number assessable to income-tax. In the companyrse of his argument Mr. Hazarnavis relied upon the decision of the Court of Appeal in Imperial Tobacco Company Kelly 1 . In that case, a tobacco manufacturing companypany in England with a view to buying tobacco leaf in the U.S.A. during the leaf season, used to provide itself with dollar currency in advance by purchasing the same beforehand. On the outbreak of war, owing to Governmental restrictions the companypany had to suspend its buying operations in U.S.A. Later, the British Treasury requisitioned the accumulated dollars and paid the companypany sterling in exchange. 1 25 T.C. 292. The dollars in the meantime having appreciated in value, the companypany got more sterling than what it originally laid out. It was held by the Court of Appeal that the excess receipts were profits assessable to income-tax and the acquisition of the dollars was the first step in the companymercial transaction of the companypany. The dollar was a companymodity of the companypany and it became a surplus stock to the companypanys requirements on the restriction on purchase and original revenue character would number be altered by the circumstance of the Governmental companytrols requisitioning the dollars. Mr. Hazarnavis also referred to the decision in Landes Brothers Simpson 1 where a similar view was taken. On the companytrary, Counsel for the respondent relied upon the decision in McKinlay H. M. Inspector of Taxes v. H. T. Jenkins Son 2 Ltd. in which it was held that the profit by exchange operations would be capital profit if the profit did number companye in by way of business but by means of an investment in foreign currencies.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 138 of 1966. Appeal by special leave from the judgment and order dated January 7, 1964 of the Allahabad High Court in First Appeal No. 289 of 1961. P. Goyal and M. V. Goswami, for the appellant. P. Sinha, Champat Rai, E. C. Agarwala and P. C. Agarwala, for respondent No. 1. The Judgment of the Court was delivered by Wanchoo, J. This is an appeal by special leave against the judgment of the Allahabad High Court and arises in the following circumstances. A suit was brought by the first respondent, Avinash Prasad Srivastava, against the appellant for dissolution of his marriage with her and the grant of a decree of divorce. In the alternative the first respondent prayed for a decree of judicial separation. His case was that he was married to the appellant on May 27, 1955, and the appellant lived with him for four years and a half The parties last resided together and companyabited at Bareilly. A number of allegations of all kinds were made in the petition by the first respondent against the appellant but it is unnecessary to refer to them, for the first respondent had to bring his case under one or other clause of s. 13 of the Hindu Marriage Act, No. 25 of 1955, hereinafter referred to as the Act if he wanted a decree of divorce, and under one or other clause of s. 10 if he wanted a decree of judicial separation. It is enough to say that the first respondents case so far as the prayer for divorce was companycerned was based upon cl. 1 of s. 13 1 , namely, that the appellant was living in adultery, and in the alternative, on cl. of s. 13 1 read with s. 2 of the Hindu Marriage Uttar Pradesh Sanshodhan Adhiniyam, No. XIII of 1962. As to judicial separation, the case apparently was based on cl. b of s. 10 1 , namely, that the first respondent had been treated with cruelty within the meaning of that section, and also on cl. f of S. 10 1 . The appellant denied that she had been living in adultery. She also denied that she ever had sexual intercourse with Chandra Prakash Srivastava, who was made a companyrespondent in the petition. She also denied that she was guilty of any cruelty as alleged. On these pleadings, two main issues arose, namely- 1 whether the appellant had been living in adultery or had sexual intercourse with Chandra Prakash Srivastava after her marriage, and ii whether she had treated the first respondent with such cruelty as to bring the case within cl. b of s. 10 1 . There were other issues as to jurisdiction and as to some property the return of which the first respondent was claiming, but we are number companycerned with them number. The trial companyrt held that the appellant was number living in adultery. It also held that it was number proved beyond doubt that there was any sexual intercourse between the appellant and Chandra Prakash Srivastava at any time. It further held that even if there had been any sexual intercourse it had been companydoned. Finally it held that numbersuch cruelty as came within the meaning of s. 10 1 b had been proved. In companysequence the petition was dismissed and the prayer for dissolution of marriage or in the alternative, for judicial separation, was refused. The first respondent then went in appeal to the High Court. The High Court held that it had number been proved that the appellant had been living in adultery within the meaning of s. 13 1 1 of the Act. An attempt was made by the first respondent to prove illicit intimacy between the appellant and Chandra Prakash Srivastava in May or June 1958, but that was number believed either by the trial companyrt or by the High Court. But the High Court relying on two letters alleged to have been written by Chandra Prakash Srivastava to the appellant held that there had been sexual intercourse between the appellant and Chandra Prakash Srivastava in 1955. The High Court also held that- there was numbercondonation by the first respondent of this adulterous intercourse. It was therefore of opinion that the first respondent would be entitled to claim judicial separation unders.10 1 f of the Act. However, using the U.P. amendment to s. 13 1 viii , the High Court held that this was a case where dissolution of marriage was necessary. The appeal therefore was allowed and dissolution of marriage was granted by the High Court. It may be added that on the question of cruelty, the High Court held that there was numbersuch cruelty as might companye within the meaning of s. 10 1 b . Thereupon the appellant obtained special leave, and that is how the matter has companye up before us. Before we deal with the merits of the appeal, we may refer to an application CMP No. 2935 of 1966 filed on behalf of the first respondent, in which he prays that the special leave granted to the appellant be revoked. The grounds taken for revocation of special leave are that the High Court granted divorce to the first respondent and ordered that its decree should take effect forthwith, with the result that the marriage between the appellant and the first respondent stood dissolved on January 7, 1964, when the High Court allowed the appeal. The special leave petition was presented in this Court on April 7, 1964 and the appellant did number companyvey to the first respondent that she was intending to challenge the decision of the High Court. She also did number pray for the stay of operation of the order of the High Court. The first respondent therefore believed that she had submitted to the order of the High Court and married another woman on July 2, 1964. Special leave was granted to the appellant by this Court on August 25, 1964, and it was only on September 9, 1964 when the first respondent got numberice of the grant of special leave that he came to know that the judgment of the High Court was under appeal in this Court. In the meantime he had already married another woman and a son was born to that woman on May 20, 1965. The first respondent therefore companytended that because of the negligence of the appellant in number informing him that she was applying to this Court for special leave, he had married again and his new wife had given birth to a son, and in companysequence this Court should number revoke the special leave that was granted so that the new child might number become illegitimate. The application has been opposed on behalf of the appellant and it is companytended that it was numberpart of her duty to inform the first respondent that she was intending to apply to this Court for special leave. It was also companytended that it was for the first respondent to make sure before marrying that numberfurther steps had been taken by the appellant after the judgment of the High Court, and in this companynection she relied on ss. 15 and 28 of the Act. In any case it is urged that the fact that the first respondent took the risk of marrying without making sure whether any further steps had been taken by the appellant was numberground for revocation of special leave. It was also pointed out that though the first respondent had been served as far back as September 9, 1964, he made the application for revocation of special leave only on September 15, 1966, when the appeal was ready for hearing. We are of opinion that special leave cannot be revoked on grounds put forward on behalf of the first respondent. Section 28 of the Act inter alia provides that all decrees and orders made by the companyrt in any proceedings under the Act may be appealed from under any law for the time being in force, as if they were decrees and orders of the companyrt made in the exercise of its original civil jurisdiction Section 15 provides that when a marriage has been dissolved by a decree of divorce and there is numberright of appeal against the decree or, if there is such a right of appeal, the time for appealing has expired without an appeal having been presented, or an appeal has been presented but, has been dismissed, it shall be lawful for either party to the marriage to marry again. These two sections make it clear that where a marriage has been dissolved, either party to the marriage can lawfully marry only when there is numberright of appeal against the decree dissolving the marriage or, if there is such a right of appeal, the time for filing appeal has expired without an appeal having been presented, or if an appeal has been presented it has been dismissed. It is true that s. 15 does number in terms apply to a case of an application for special leave to this Court. Even so, we are of opinion that the party who has won in the High Court and got a decree of dissolution of marriage cannot by marrying immediately after the High Courts decree take away-from the losingparty the chance of presenting an application for special leave. Even though s. 15 may number apply in terms and it may number have been unlawful for the first respondent to have married immediately after the High Courts decree, for numberappeal as of right lies from the decree of the High Court to this Court in this matter, we still think that it was for the first respondent to make sure whether an application for special leave had been filed in this Court and he companyld number by marrying immediately after the High Courts -decree deprive the appellant of the chance to present a special leave petition to this Court. If a person does so, he takes a risk and ,cannot ask this Court to revoke the special leave on this ground. We need number companysider the question as to whether the child born to the new wife on May 20, 1965 would be legitimate or number, except to say that in such a situation s. 16 of the Act may companye to the aid of the new child. We cannot therefore revoke the special leave on the grounds put forward on behalf of the first respondent and hereby dismiss his application for revocation of special leave. Turning number to the merits of the appeal, we have already indicated that the High Court as well as the trial companyrt are agreed that the appellant was number living in adultery at the time when the petition was filed. They are also agreed that there was numbersuch cruelty a would bring the case within the meaning of s. 10 1 b of the Act. But the High Court found that there had been adultery between the appellant and Chandra Prakash in 1955 and the evidence for that companysisted of two letters said to have been written by Chandra Prakash to the appellant. We cannot agree with this companyclusion of the High Court. Chandra Prakash was married to a companysin of the appellant. He was therefore number a stranger to the appellant and his writing letters to her would number therefore be a matter of any surprise. We cannot also forget that the appellant in her statement has denied on oath that she ever had illicit companynection with Chandra Prakash. There is also numberdoubt that the attempt of the first respondent to prove that there had, been illicit intimacy between the appellant and Chandra Prakash in May June 1958 has failed and both the companyrts have disbelieved the evidence in this behalf. It is in this background that we have to examine the two letters on which reliance has been placed by the High Court, that being the only evidence in proof of adultery in 1955. It is true that the appellant has denied receiving those letters and has also denied that she ever sent any letters to Chandra Prakash. One can understand this denial in the case of a person like the appellant who was facing a petition for divorce on the ground of adultery. But assuming that those two letters were received by the appellant, that does number in our opinion prove that there was any adultery between the appellant and Chandra Prakash in 1955. We have read those letters and we must say that they are most improper and should number have been written by a person like Chandra Prakash who was married to the companysin of the appellant. But the first thing that strikes us is that the mere fact that some male relation writes such letters to a married woman, does number necessarily prove that there was any illicit relationship between the writer of the letters. and the married woman who received them. The matter may have been different if any letters of the appellant written to Chandra Prakash had been proved. Further there is intrinsic evidence in the letters themselves which shows that whatever might have been the feelings of Chandra Prakash towards the appellant, they were number necessarily reciprocated by the appellant. In Ex. 2, Chandra Prakash wrote to the appellant, You love me as you love others and this is why my share is very small. You write me letters to satisfy your anger. This seems to suggest as if Chandra Prakash was getting numberresponse from the appellant. Again in Ex. 3, Chandra Prakash wrote, I know that you would be angry with me, but what can I do. This again suggests that Chandra Prakash was getting numberresponse from the appellant. Further in both these letters Chandra Prakash companyveyed his respects to the appellants husband, and on the whole we are number satisfied that these letters indicate that there must have been sexual intercourse between the appellant and Chandra Prakash in 1955, which was the time when these letters were written. When we have the clear denial of the appellant to the effect that she never had any sexual intercourse with Chandra, Prakash, we have numberhesitation in accepting that denial, for there is numberhing in these letters which would even suggest that the denial was false. Nor does the evidence of the first respondent, once the incident of May June 1958 has been disbelieved, show anything from which it can be inferred that there was any illicit relation between the appellant and Chandra Prakash in 1955 or at any other time. We are therefore in agreement with the trial companyrt that these ,letters do number show that there was any illicit relationship between the appellant and Chandra Prakash in 1955. We are further of opinion that even assuming that these letters indicate that there was some illicit intimacy between the appellant and Chandra Prakash, the High Court was still in error in granting divorce under s. 13 1 viii as amended by the U.P. amendment. By the U.P. amendment, the following clause was substituted for cl. viii in the Act and was deemed always to have been substituted- has number resumed companyabitation after the passing of a decree for judicial separation against that party and- a a period of two years has elapsed since the passing of such decree, or b the case is one of exceptional hardship to the petitioner or of exceptional depravity on the part of the other party As we read this provision, it is clear that before a decree for divorce can be granted thereunder, there must first be a decree for judicial separation and thereafter under the amendment a decree for divorce ,will follow if one of two companyditions is satisfied, namely that i a period of two years has elapsed, or ii the case is one of exceptional hardship to the petitioner or of exceptional depravity on the part of the other party. Sub-clause b in our opinion is number independent. That sub-clause only companyes into operation after a decree of judicial separation has been passed. We cannot accept the companytention that it is open to a companyrt under the amended provision to grant a decree of divorce on the ground of exceptional hardship to the petitioner or of exceptional depravity on the part of the other party, even without a decree of judicial separation having been first made. Sub-clause b can only apply after a decree for judicial separation has been passed and it is number open to a companyrt to apply that clause and give a divorce forthwith as has been done in this case on the assumption that a decree of judicial separation companyld have been passed on the ground mentioned in s. 10 1 f . We are clearly of opinion that the amended clause namely, cl. viii of s. 13 1 still requires first a decree of judicial separation and thereafter a decree of divorce may follow under cl. b without waiting for two years, which is the necessary period for the application of cl. a . The High Court therefore was number right in passing the decree of divorce in this case forthwith under sub-cl. b of s. 13 1 viii as amended in U.P. It has however been urged on behalf of the first respondent that we may number pass a decree of judicial separation instead of a decree of divorce passed by the High Court. We are of opinion that even that cannot be done in the present case. The only ground on which the decree of judicial separation can number be asked for is that mentioned in s. 10 1 f , namely that the appellant had sexual intercourse with any person other than her husband after the marriage. The only allegation in that respect was that the appellant had sexual intercourse with Chandra Prakash in 1955, and that is sought to be proved by the two letters to which we have referred already. We have held that those letters do number prove that there was any sexual intercourse between the appellant and Chandra Prakash in 1955. Therefore, there is numberground even for a decree of judicial separation in favour of the first respondent Besides even if we were of opinion that there had been sexual intercourse between the appellant and Chandra Prakash in 1955 which we have numberdoubt is number true this would be a case of companydonation under s. 23 1 b of the Act. Under that provision a decree of judicial separation cannot be passed under s. IO 1 b , if it appears to the companyrt that the petitioner has in any manner been accessory to or companynived at or companydoned the act or acts companyplained of. In his statement under 0. X. r. 2 of the Code of Civil Procedure, the first respondent stated that it was in the month of June or July 1955 or 1956 that illicit relations of the appellant with Chandra Prakash were companyfirmed to him. According to that statement the first respondent knew even in 1955 or 1956 that there had been adultery between the appellant and Chandra Prakash. Even so, the first respondent companytinued to live with the appellant and a son was born to them in 1957. In his evidence the first respondent tried to resile from his statement made under 0. X r. 2 and said that what he meant was that in 1955/1956 he entertained suspicion only. This explanation is of companyrse untrue, for the words used in the statement under 0. X r. 2 were that illicit relations between the appellant and Chandra Prakash were companyfirmed to him. Even in his evidence the first respondent stated that he was definite in May June 1958 that there was illicit companynection between the appellant and Chandra Prakash. It was admitted by the first respondent that he had sexual relations with the appellant right upto October 1958. It is only in February 1959 when the appellant came finally to live with the first respondent that he said that he had numbersexual relations with her during her stay of fifteen days. He also admitted that even after May June 1958 he was willing to keep the appellant at the instance of his friends. Reliance in this companynection is placed on Perry v. Perry as to the companytent of companydonation, which involves forgiveness companyfirmed or made effective by reinstatement. That was however a case of desertion. It is urged that in order that forgiveness may be companyfirmed or made effective, something more than stray acts of companyabitation between husband and wife have to be proved. But where as in this case, judicial separation is being claimed on the ground of s. 10 1 f , the fact that the husband companyabited with the wife even after the knowledge that she had been guilty of companyabiting with another person would in our opinion be sufficient to companystitute companydonation, particularly, as in this case, the first respondent knew of the alleged adultery in May June 1958 and still companytinued to companyabit with the appellant thereafter upto October 1958. Further the statement of the first respondent to the effect that he kept his wife after May June 1958 at the instance of his friends is a clear indication of companydonation even in the sense of forgiveness companyfirmed or made effective by reinstatement. We are therefore of opinion that the first respondent is number even entitled to a decree of judicial separation.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 1058 of 1965. Appeal by special leave from the judgment and order dated March 14/15, 1961 of the Bombay High Court in Income-tax Reference No. 56 of 1960. Arvind P. Patwe, O. C. Mathur, for the appellant. T. Desai, A. N. Kirpal and R. N. Sachthey, for the res- pondent. The Judgment of the Court was delivered by Ramaswami, J. This appeal is brought, by special leave, on behalf of the assessee from the judgment of the Bombay High Court dated March 15, 1961 in Income-Tax Reference No. 56 of 1960. The assessee is a partnership firm companystituted under a Deed of Partnership dated March 19, 1950. The partners are three brothers- Nandlal Bhimjibhai,Tarachand Bhimjibhai andRajnikant Bhimjibhai, each one having an equal 1/3rd sharein he partnership firm. Prior to November, 1949, the threepartners of the assessee-firm in partnership with eight others carried on business in Bombay and other places in the name and style of Rajnikant Vitheldas Co. In that larger firm, each one of the three brothers had an equal two annas share each, the other eight partners having the remaining ten anna share. The larger partnership of Rajnikant Vitheldas Co. was dissolved on October 31, 1949 and on its dissolution the business of the two branches thereof at Nagpur was allotted to the three brothers, who thereupon as from November 1, 1949 companystituted themselves into a new firm, viz., the assessee-firm under the deed of partnership executed on March 19, 1950. This document recites that the three brothers have agreed to companytinue the business of the two branches at Nagpur in partnership on the terms mentioned in that document. For the purpose of this case, it is number necessary to reproduce all the terms of the partnership deed. It is sufficient to reproduce only four terms as follows The capital of the partnership shall be Rs. 2,40,000. - Rupees two lacs forty thousand divided into 15 shares of Rs. 16,000/- each. The partners hereby agree that the shares allotted to different partners will be equal i.e., each partner will get five shares. After meeting all expenses, interest and other charges,the resulting net profit or loss shall be ascertained and shall be divided amongst all partners. In case of death, or insolvency of any partner the surviving partners or such of them as are willing shall have the rights to purchase the shares of such partners at the valuation of the shares in the preceding balance sheet. In case of any partner desiring to retire from the partnership will have to give a written numberice of at least two months to the other partners of his intention to do so. On receipt of such numberice, the remaining partner or partners will purchase the share or shares in pro- 1000 portion to their holding at the time the valuation in paragraph 13. In the assessment year 1951-52, the three partners applied to the Income-tax Officer for registration of the firm under the Indian Income-tax Act, 1922 hereinafter called the Act . Along with this application, the deed of partnership dated March 19, 1950 was produced. By his order dated March 20, 1956 the Income-tax Officer granted registration under s. 26A of the Act for the assessment year 1951-52. On the same day, he determined the total income of the firm at Rs. 87,172/-, and under s. 23 6 of the Act, allocated it between the three partners for tax purposes, each partner getting one-third share of the total income i.e., Rs. 29,0571/. On the basis of the same deed, an application was made for the renewal of registration of the firm for the assessment year 1952-53. The renewal was granted- on March 28, 1957. For the assessment year 1953- 54,the partners again applied for renewal of registration on thebasis of the same deed, but the Income-tax Officer was of theopinion that there was numberclause in the deed specifying theindividual shares of each partner as required by s. 26A of the Act. After issuing numberices to the three partners and after giving them a hearing, the Income-tax Officer, by his order dated March 28, 1958, rejected the application of the partners for renewal of re- gistration of the firm. The assessee took the matter in appeal to the Appellate Assistant Commissioner but the appeal was dismissed. The assessee preferred a second appeal to the appellate Tribunal but that appeal also was dismissed. At the instance of the assessee the appellate Tribunal referred the following question of law for the determination of the High Court under s. 66 1 of the Act Whether on a proper companystruction of the partnership deed dated 19-3-1950, the firm sought to be registered for the assessment year 1953-54, can be said to have -been companystituted under an instrument of partnership specifying the individual shares of the partners as required by section 26A of the Act By its judgment -dated March 15, 1961, the High Court answered the question in the negative, holding that renewal of registration under s. 26A of the Act was rightly refused by the Income-tax -authorities. Section 26A of the Act provides as follows 26A. Procedure in registration of firms. 1 Application may be made to the Income-tax Officer on behalf of any firm, companystituted under an instrument of partnership specifying the individual shares of the partners, 1001 for registration for the purposes of this Act and of any other enactment for the time being in force relating to income-tax or Super-tax. The application shall be made by such person or persons, and at such times and shall companytain such particulars and shall be in such form, and be verified in such manner, as may be prescribed and it shall be dealt with by the Income-tax Officer in such manner as may be prescribed. By securing registration under the Act, the partners of the firm obtain a benefit of lower rates of assessment and numbertax is directly charged on the income of the firm. This is an important benefit to which the partners of a registered firm become entitled as a companysequence of registration and if it is intended to secure that benefit, the requirements of s. 26A of the Act and the Rules framed under the Act must be strictly companyplied with Rule 2 of the Income-tax Rules framed under s. 59 of the Act requires that the application shall be signed by the partners number being minors personally, and prescribes the period within which the application shall be made for the year in question. Rule 3 provides that the application shall be made in the prescribed form and shall be accompanied by the original instrument of partnership under which the firm is companystituted, together with a companyy there of. It is provided by Rule 4 that if on receipt of the application, the Income- tax Officer is satisfied that there is or was a firm in existence companystituted as shown, in the instrument of partnership, and that the application has been properly made, he shall enter in writing at the foot of the instrument or certified companyy, as the case may be, a certificate in the prescribed form By rule 6 the certificate of registration granted under Rule 4 may be renewed for subsequent years. Section 4 of the Partnership Act defines Partnership as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all Persons who have entered into partnership with one another are called individually part- ners and companylectively a firm, and the name under which their business is carried on is called the firm name. Section 13 of the Partnership Act provides as follows Subject to companytract between the partners- a a partner is number entitled to receive remuneration for taking part in the companyduct of the business b the partners are entitled to share equally in the profits earned, and shall companytribute equally to the losses sustained by the firm M17Sup.CI/66-19 1002 On behalf of the assessee the argument was put forward that the High Court was in error in holding that the assessee was number entitled to registration under s. 26A of the Act. It was submitted that on a proper companystruction of the various clauses of the partnership deed dated March 19, 1950 it should have been held that the shares of the three individual persons in the profits and losses were clearly specified, namely, that each partner was allotted an equal one-third share and there was hence specification of the individual shares of the partners within the meaning of s. 26A of the Act. In our opinion, the argument of the appel- lant is well-founded and must be accepted as companyrect. It is evident that under cl. 3 of the partnership deed, the capital allotted to each partner is equal, viz., 5 shares of Rs. 16,000/each in a total capital of Rs. 2,40,000/-. Clause 10 states that after meeting all expenses, interest and other charges, the resulting net profit or loss shall be ascertained and shall be divided amongst all partners. It should also be numbericed that in all the applications for registration made by the assessee-firm under s. 26A of the Act the three partners have been shown to share the profits of the partnership firm equally. There is also the other circumstance that in the books of accounts for all the years since its companymencement from November 1, 1949 right upto date the profits have been apportioned equally mong the three partners of the partnership firm. Reading the partnership deed as a whole and in the companytext of the relevant circumstances of the case, we are of the opinion that there was specification of the individual shares of the partners in the profits within the meaning of s. 26A of the Act and the assessee-firm was entitled to registration for the assessment year in question. It was pointed out by this Court in Kylasa Sarabhaiah v. Commissioner of Income tax, Hyderabad 1 that although the application for registration of a firm under s. 26A of the Act had strictly to be in companyformity with the Act and the Rules, in ascertaining whether the application was in companyformity with the Rules, the deed of partnership had to be reasonably companystrued. In that case, there were three major partners. in firm A in which four minors were admitted to the benefits of partnership. Its profits were to be shared equally between the seven persons whereas the losses were to be shared by the three major partners equally. A larger firm, firm B, was companystituted, with five partners, under a deed of partnership in which firm A was described as the first partner and its members were companylectively shown as having a share of 6 annas 9 pies in the profits of the larger firm. The fact that four minors were admitted to the benefits of partnership in firm A with equal shares in the profits but losses were to be shared only by its three major partners, was, however, recited in the preamble 1 1965 2 S.C.R. 310 56 I.T.R. 219. 1003 to the deed of partnership of firm B. The deed of partnership of firm B was signed by all the major partners of firm A. The question at issue was whether firm B was entitled to be registered under s. 26A of the Act. It was held that the firm was entitled to be registered and that registration companyld number be refused merely because the deed of partnership set out in paragraph 8 therein the companylective share of the yarn shop as 6 annas 9 pies, for in the preamble the division of the shares of profits and losses among the three members of the yarn shop and those admitted to the benefits of the partnership was clearly indicated. It was, however, pointed out that the yarn shop as such was number introduced as a partner and the agreement was in truth between the three major members out of those who companystituted the yarn shop and four outsiders. Each of them had signed the application and the companyenants of the partnership agreement bind the partners individually. The indication in the deed of partnership that three of them held qua the yarn shop a certain relation did number affect their status as partners of the appellant-firm individually. The principle laid down in this case applies also to the present case and, for the reasons already expressed, we hold that the assessee-firm was entitled to.

Case appeal was accepted by the Supreme Court

Ramaswami, J. These appeals are brought, by certificate, from the judgment of the High Court of Gujarat, dated September 25, 1964, in Income-tax Reference No. 22 of 1963. Hazrat Pirmahomed Shah Saheb was a renowned Muslim saint who lived in Gujarat in the early half of the eighteenth Century. At the time of his death he left a large number of followers. During his lifetime he initiated some of his followers as his disciples and those so initiated came to be known as Murids. At the time of the demise of the saint, the number of Murids was about 400. The descendants of the Murids also became Murids. Thus the class of Murids companysists of the descendants of the Murids initiated by the saint in his lifetime. After the death of the saint in 1742, his disciples and devotees subscribed moneys and companylected donations for the purpose of building a Roza or Dargah mausoleum to companymemorate his memory. Besides the Roza, a mosque was also built for the purpose of offering Fatiahs and prayers. In accordance with Islamic doctrine, all Muslims, whether Murids or number-Murids, had unrestricted access to the Roza and the mosque. Now the maintenance of the Roza and the mosque required moneys and so also did the observance of festive occasions such as Urs, death anniversaries, etc., at these institutions. Several gifts of properties were, therefore, made by Murids for these purposes and certain properties were also purchased by persons in management out of offerings made at these institutions. All these properties were treated as properties of the Roza and the income from these properties after payment of municipal taxes, insurance premia and othera out-goings in respect of the properties was utilised for maintenance of the Roza and the mosque and observance of festive occasions such as Urs, death anniversaries, etc. It appears from the statement of receipts and expenditure for the years 1942-43 to 1956-57 produced before the Appellate Tribunal, which is annexure L to the statement of case, that during those years a part of the surplus income of the properties after meeting this expenditure on the maintenance of the Roza and the mosque and the observance of festive occasions such as Urs, death anniversaries, etc., was also utilised for running madrassas, library and payment of expenses on items, such as longer and bhandar for giving food to pilgrims attending the Roza and the mosque on festive occasions. The surplus income was at numbertime utilised for the personal benefit of the Murids. The Murids, however, had two kinds of rights in the properties of the Roza. Some of the Murids who had companytributed to the companyt of companystruction of certain rooms per entitled to reside in those rooms when they came to the Roza. Then there were certain date trees in the premises of Roza and the Murids were entitled to the dates from those trees. The earliest records available are the records of the first survey operations carried out between 1870 and 1880 and they show that at that time the Roza and the mosque were recognised as wakf and were entered as such in the revenue records. The properties which were purchased for the Roza from time to time were also described as sold to the wakf in the revenue records. There was numberevidence to show how the properties of Roza were managed prior to 1888 but the minutes of the meeting of the Murids held on October 15, 1888, indicate that until then the management of the properties was being looked after by the general body of Murids through certain appointed agents. At this meeting resolutions were passed by the general body of Murids laying down certain rules in companynection with the management and administration of the Roza properties. In these resolutions, the properties were described as belonging to the Roza and a companymittee was appointed to manage and administer the Roza properties. The companymittee was enjoined to look after the properties of the Roza, maintain the Roza and the mosque and defray the expenses incurred on Urs and other functions in the Roza. The companymittee hereinafter called the Roza Committee thereafter carried on the management and administration of the Roza properties. In 1923, the Mussalman Wakf Act was passed which gave rise to companysiderable litigation between the Roza Committee on the one hand and the Anjuman-i-Islam representing the Muslim companymunity in general. With a view to prevent interference in the management of the Roza Committee by the Muslims in general, the Roza Committee took up the stand that the Mussalman Wakf Act did number apply to their case. While the litigation was pending, the Bombay Public Trusts Act, 1950, came into force on January 21, 1952. Since the Act required applications to be made for registration of all public trusts, the Roza Committee made an application to the Charity Commissioner on May 30, 1952, for registration of the wakf. The application was made under protest since the companytention of the Roza Committee was that the wakf was number a wakf for the benefit of the public but was a wakf merely for the benefit of the Murids and was, therefore, number liable to be registered as a public trust. The application was, however, withdrawn on November 2, 1953. The Assistant Charity Commissioner thereupon started a suo motu inquiry under the Act but before this inquiry was companycluded, the Roza Committee made another application for registration of the wakf to the Charity Commissioner on April 28, 1955. In this application the Roza Committee companyceded that the wakf was for the benefit of the public and was, therefore, liable to be registered as a public trust. The Assistant Charity Commissioner thereupon made an order dated April 29, 1955, registering the wakf as a public trust. In the meantime, on March 28, 1953, the Income-tax Officer issued numberices to the Roza Committee under section 44 1 a for the assessment years 1944-45 to 1948-49, the companyresponding accounting years being Samvat years 1999 to 2003. The numberices were issued on the ground that by reason of the failure of the appellant to make a return of its income under section 22 of the Income-tax Act, 1922 hereinafter called the Act , the income of the appellant for those assessment years had escaped assessment. The appellant companytended that the income derived from the Roza properties was exempt from tax under section 4 3 i of the Act. The claim for exemption was rejected by the Income-tax Officer whose order was affirmed by the Assistant Commissioner in appeal. The appellant took the matter in further appeal to the Appellate Tribunal. The Tribunal held, in the first place, that the Roza properties were wakf properties were held under a legal obligation for a private religious purpose and number for a public religious purpose. The Tribunal also examined the question whether the properties were held by the Roza Committee for a charitable purpose and took the view that the class of Murids companyld number be regarded as a section of the companymunity and, therefore, the Roza properties were number held under a legal obligation for a wholly charitable purpose. The Tribunal accordingly rejected the claim of the appellant for exemption from taxation under section 4 3 i of the Act. As directed by the High Court, the Appellate Tribunal stated a case on the following questions of law Whether, on the facts and in the circumstances of the case, the properties of the Hazrat Pir Mohamed Shah Saheb Roza Committee are held under trust or other legal obligation for public, religious or charitable object ? Whether the income from the wakf properties for the relevant assessment nears is entitled to exemption under section 4 3 i and or 4 3 ii of the Indian Income-tax Ac ? The High Court answered both the questions against the appellant, holding that, upon the evidence given, the purpose of the wakf included the maintenance of madrases and the library which as number proved to be a wholly religious purpose. The High Court also held that the class of Murids did number companystitute a section of the companymunity so as to satisfy the test of public benefit involved in a charitable purpose, but was merely a fluctuating body of private individuals and, therefore, rejected the claim for exemption on the basis that the wakf was a wakf wholly for a charitable purpose. In support of this view the High Court relied upon the decision of the House of Lords in Oppenheim v. Tobacco Securities Trust Co. Ltd. Section 4 3 i of the Act, as it stood at the material time, was to the following effect 4. 3 Any income, profits or gains falling within the following classes shall number be included in the total income of the person receiving them Any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, and in the case of property so held in part only for such purposes, the income applied, or finally set apart for application, thereto In this sub-section charitable purpose includes relied of the poor, education, medical relief, and the advancement of any other object of general public utility, but numberhing companytained in clause i , clause ia or clause ii shall operate to exempt from the provisions of this Act that part of the income of a private religious trust which does number ensure for the benefit of the public. The main question presented for determination in these appeals is whether the Roza properties were held in trust or under a legal obligation wholly for a religious purpose. The Appellate Tribunal elaborately examined this question and found that the wakf was for a wholly religious purpose. In support of this finding the Appellate Tribunal observed that the purpose of the wakf was the maintenance of the Roza and the mosque and the observance of festive occasions such as the Urs, death anniversaries, etc., at these institutions. It was also pointed out that, in accordance with Islamic doctrine, all Muslims, whether Murids or number-Murids, had unrestricted access to the Roza and the mosque. It was further held that the income of the Roza properties after payment of municipal taxes, insurance premia, etc., was utilised for maintenance of the Roza and the mosque and the observance of the festive occasions such a Urs, death anniversaries, etc. It appears from the statement of receipts and expenditure for the years 1942-43 to 1956-57 produced before the Appellate Tribunal that a part of the surplus income of the properties was also utilised for running madrassas, library and for langar and bhandar for giving food to pilgrims attending the Roza and the mosque on festive occasions. There was, however, numberevidence before the Appellate Tribunal to show that any portion of the income of the wakf was utilised for madrassas or library prior to the year 1942-43. The Tribunal therefore held that the original purpose of the wakf was companyfined to the maintenance of the Roza and the mosque and celebration of festive occasions and therefore the wakf was established for a wholly religious purpose. At the hearing of the reference, the High Court has interfered with the finding of the Tribunal on this point. The High Court companysidered that the maintenance of madrassas and the library must be taken to be one of the original purposes of the wakf and the finding of the Tribunal that the wakf was wholly for a religious purpose must be overruled. It is manifest that the question as to what was the object of the wakf is essentially a question of fact and the High Court had, therefore, numberjustification for interfering with the finding of the Tribunal on this point. It was pointed out by this companyrt in India Cements Ltd. v. Commissioner of Income-tax that in a reference under section 66 of the Act the High Court must accept the findings of fact made by the Appellate Tribunal, and it is number open to the High Court to reopen the findings of fact unless the party companycerned has applied for a reference to challenge those findings first by an application under section 66 1 of the Act. If he has failed to file an application 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 another. Similarly, in another case, Commissioner of Income-tax v. M.Ganapathi Mudaliar, it has been pointed out that, even if the question referred to the High Court is regarding the existence of material to support a finding of fact arrived at by the Appellate Tribunal, the High Court should number act as an appellate companyrt and companysider whether the finding was justified or number. In the present case, we think that there was numberwarrant for the High Court to interfere within the finding of the Appellate Tribunal that the purpose of the wakf was wholly religious and the maintenance of madrassas and library from 1942-43 onwards was number the original purpose for which the properties were gifted by the Murids, and that the allotment of money for the maintenance of madrassas and library did number alter the original character of the wakf which was established for a wholly religious purpose, viz., for the maintenance of the Roza and the mosque and the observance of festive occasions such as Urs and death anniversaries, etc., at these institutions. It has been stated by the Appellate Tribunal that the benefit of the wakf was available to all Muslims whether Murids or number-Murids who had unrestricted access to the Roza and mosque and the festivities celebrated therein. Upon the facts found by the Appellate Tribunal we are of opinion that the Roza properties were held for a wholly religious purpose of a public character and therefore the income of the Roza properties was exempt from assessment under section 4 3 i of the Act. On behalf of the appellant an alternative argument was presented that the class of Murids companystituted an appreciable section of the Sunni Bohra companymunity and the income from the Roza properties was exempt from assessment on the ground that the Roza properties are held under a legal obligation for wholly charitable purposes. The opposite view- point was put forward on behalf of the respondent and it was said that the class of Murids did number companystitute a section of the companymunity but was merely fluctuating body of private individuals. In support of this argument reference was made to the decision of the House of Lords in Oppenheim v. Tobacco Securities Trust Co. Ltd., where it was held that, though the group of persons indicated was numerous, the nexus between them was employment by particular employers, and accordingly the trust did number satisfy the test of public benefit requisite to establish it as charitable. Reference was also made to a later decision in Mohamed Falil Abdul Gaffoor and Others Trustees of the Abdul Caffoor Trust v. Commissioner of Income-tax, Colombo, in which it was held by the Judicial Committee that in view of the absolute priority to the benefit of the trust income which was companyferred on the grantors own family by clause 2 b i of the trust deed, this was a family trust and number a trust of a public character wholly for charitable purpose, and income thereof was accordingly number entitled to the exemption claimed by the appellant. In our opinion, it is number necessary to express any companycluded opinion on this aspect of the case, because we have already held that the appellant is entitled to exemption from being taxed on the ground that the income was derived from property held under a legal obligation wholly for a religious purpose. For these reasons we hold that the judgment of the High Court should be set aside and the questions referred to the High Court must be answered in the affirmative and in favour of the assessee. We accordingly allow these appeals with companyts.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 176 of 1966. Appeal by special leave from the judgment and order dated March 11, 1963 of the Calcutta High Court in Income-tax, Re- ference No. 80 of 1959. T. Desai and J.P. Goyal, for the appellant. Sen, A.N. Kirpal and R.N. Sachthey, for the respondent. The Judgment of the Court was delivered by Shah J. M s. Ram Kumar Agarwalla Brothers--hereinafter called the assessees-were carrying on business at Calcutta as share-brokers, share dealers and paper merchants, Swadeshi Cotton Mills idea public limited companypany-operates at Kanpur a large unit producing companyton textiles. It was originally managed by a firm of Managing Agents styled M s. Horseman Brothers. Some time early in 1946 M s. Horseman Brothers desired to dispose of their share-holding in the Company, and to part with the Managing Agency. David Mitchell a partner of M s. Lovelock Lewis-accountants of the Company-Rowan Hodge of M s. Orr Dignam Co.-solicitors of the Company-and the assessees started joint negotiations with M s. Horseman Brothers to purchase the companytrolling interest in the Company. About the month of April, 1946 M s. Mangturam Jaipuria acting through their partner Anand- ram Gajadhar were also negotiating to secure the companytrolling interest in the Company. M s. Mangturam Jaipuria addressed a letter on April 29, 1946 to David, Mitchell to the following effect With reference to your negotiations to acquire the companytrolling interest in the Swadeshi Cotton Mills Co. Ltd., we companyfirm that we and our associates are desirous of purchasing the same and in the event of your securing the same for us and upon your giving up all claims to purchase the same and assigning to us and our associates any interest that you may have acquired therein, we hereby agree to pay you and your companyleagues a capital sum of Rs. 6,00,000/-. Such, payment to be made upon companypletion of the purchase by us. M s. Mangturam Jaipuria also obtained a letter of guarantee for Rs. 6,00,000/- from the Imperial Bank of India in favour of David Mitchell. M s. Mangturam Jaipuria purchased the shareholding of M s. Horseman Brothers for Rs. 4,03,00,000/-. Thereafter the amount of Rs. 6,00,000/- was duly paid to David Mitchell, Rowan Hodge and the assessees, and it was divided equally between them-each receiving Rs. 2 lakhs. The assessees paid Rs. 25,000/- out of their share to one Ratan Lal Goel for services rendered in the dear, and credited the balance of Rs. 1,75,000/- as brokerage in their profit loss account, and submitted a return of income for the assessment year 1947-48 showing that receipt as income from brokerage in the companyrse of business. Later, the assessees submitted a revised return excluding the amount of Rs. 1,75,000/-. The Income-tax Officer rejected the claim of the assessees that the amount of Rs. 1,75,000/- was a number-recurring casual receipt exempt from tax under s. 4 3 vii of the Act or that it was a capital and number revenue receipt. The order was companyfirmed by the Appellate Assistant Commissioner. On the plea of the assessees that the amount of Rs. 2,00,000 was received by them as companysideration for agreeing to refrain from carrying on their business and was on that account number taxable as their income, and that in any event it was a number-recurring casual receipt, there was difference of opinion between the two Members who companystituted the Appellate Tribunal, and the appeal was referred to a third Member who remanded the case for a finding on certain matters on which the order of the Appellate Assistant Commissioner was silent. The Appellate Assistant Commissioner then reported that the payment of Rs. 6,00,000/- was number made only as an inducement to the assessees to refrain from companypetition in purchasing the companytrolling interest in the Company, but it was made to remunerate the services rendered by the assessees and their associates in helping M s. Mangutram Jaipuria to acquire the companytrolling interest. The Tribunal agreed with the report of the Appellate Assistant Commissioner and dismissed the appeal. The Tribunal observed He never had the intention or the money to buy the Mills worth a few crores. The very fact that he had two other associates will again show that there was numberintention of either of these three persons to purchase the Mills. Partners of solicitors and auditors had numberintention of buying the Mills. I think that the sum of Rs. 2 lacs has accrued to the assessee as a result of a venture in the nature of trade. Services of auditors, brokers and solicitors have been employed in companypleting the sale. The Tribunal submitted a statement of the case on the following two questions, on application by the assessees, under s. 66 1 of the Income-tax Act Whether there was any material on record before the President to give a finding to the effect that the companytention of the assessee that it intended to buy the Mills was without any basis whatsoever ? Was the receipt in question a revenue receipt from a venture in the nature of trade and has it, been rightly brought to tax The High Court of Calcutta held that there was ample material to support the finding of the Tribunal that the receipt in question, was a revenue receipt from a venture in the nature of trade. With special leave, the assessees have appealed to this Court. Counsel for the assessees says that the two Members of the Tribunal who originally heard the appeal had companycurrently held that Rs. 6 lakhs were paid to the assessees and their associates for dissuading them for number companypeting with M s. Mangturam Jaipuria and it was number open to the third Member to ignore that finding and to arrive at a different companyclusion. We are unable to agree with that companytention. On a difference of opinion, the appeal in its entirety and number any specific question, was referred to the third Member. Again only the Accountant Member was of the view that the receipt of Rs. 2 lakhs to the assessees arose number in the companyrse of their business, but because they agreed to refrain from companypeting with M s. Mangturam Jaipuria in that firms attempt to acquire -the companytrolling interest in the Company the Judicial Member did number accept that view. The terms of the letter addressed by M s. Mangturam Jaipuria to David Mitchell make it abundantly clear that Rs. 6 lakhs were agreed to be paid primarily as remuneration for services to be rendered The expression in the event of your securing the same companytrolling interest in the Swadeshi Cotton Mills for us, and upon your giving up, all claims to purchase the same, and assigning to us and our asso- ciates any interest that you may have acquired, we hereby agree to pay you sum of Rs. 6,00,000/- evidences that object. The Tribunal had also called for a report from the Appellate Assistant Commissioner and that Officer, as we have already observed, expressly recorded that the payment made to the assessees and their associaties was for services rendered in acquiring the companytrolling interest for M s. Mangturam Jaipuria and number for dissuading them in companypeting for the purchase of the shares. The Tribunal accepted the report of the Appellate Assistant Commissioner, and observed that the assessees had numberintention to buy the companytrolling interest in the Company. The principal business of the assessees was in paper, and they were doing some business in shares and brokerage in shares. The evidence does number disclose how it was intended by the assessees to finance such a large transaction. The Tribunal was apparently of the view that a solicitor, an auditor and a firm of share- brokers and paper merchants companyld number have been associated in a genuine project of acquiring the companytrolling interest in one of the largest textile units in the companyntry which was expected to and did companyt Rs. 4 crores. The Tribunal had directed that certain persons including Ram Kumar Agarwalla the-principal partner of the assessees be examined as witnesses. The principal partner of the assessees did number give evidence. Ramgopal Agarwalla another partner of the firm who appeared before the Appellate Assistant Commissioner pleaded. that he had numberpersonal knowledge about the details of the negotiations or as to the financial part of the aspect of the matter, since it was being dealt with by the senior partner Ram Kumar Agarwalla. David Mitchell and Rowan, Hodge had it appears left India, and they also companyld number be examined. The companyclusion recorded by the Tribunal that the assessees David Mitchell and Rowan Hodge had numberintention to acquire the companytrolling interest, but were seeking to associate themselves in a venture in the nature of trade, cannot in the circumstances be said to be without evidence. The companyclusion that the assessees and their two associates received Rs. 6,00,000/- number in companysideration of refraining from companypeting in the purchase of, the companytrolling interest, but as remuneration for services rendered is based on evidence before the Tribunal. The receipt must therefore be regarded as a revenue receipt earned in the companyrse of the business of the assessees. It is unnecessary to make a detailed reference to the decisions which were cited at the Bar e.g. Higgs v. Oliver and in Commissioner of Income-tax Bombay v. The Mills Store Co. Karachi 2 . In Higgss case a professional actor who had agreed to give his exclusive services to a film companypany in companysideration of a fixed sum,. and a proportion of the net profits from exploitation of a film was, after the agreement was fulfilled, given a sum of 15,000 a companysideration for an undertaking number to act, produce or direct any film for any person for a period of eighteen months. It was held that the amount paid was number for carrying on business, but for refraining from carrying on the business, and was number taxble. In the Mills Store Companys case 2 under an agreement for a stated companysideration the assessee Company parted with the oil tanks and installations and other structures and goodwill and leasehold rights held by it in respect of the land on which its business of storing petroleum and petroleum products was carried, and agreed number to import petroleum for ten years, and number to act on behalf of any one else as importers of petroleum for five years. By another agreement in companysideration of extending the latter restriction to ten years, the assessee was paid Rs. 10,000/- annually during the subsistence of the restriction. It was held by the Chief Court of Sind that the sum of Rs. 10,000/- was number the direct result of the profit or gains accruing to the assessees as a result of the business actually carried on by them, and did number fall under the head Profits and gains of business, profession or vocation. These cases have, on the findings recorded by the Tribunal numberrelevance. Under S. 4 3 vii receipts which are of a casual and number- recurring nature are number liable to be included in the companyputation of the total income of the assessee but the rule in express terms does. 1 33 T. C. 136. 2 9 I.T.R. 642. number apply to capital gains, receipts arising from business or the exercise of a profession or vocation and receipts by way of addition to the remuneration of an employee. On the finding recorded by the Tribunal, the receipt arose from the business of the assessees, and is number exempt under s. 4 3 vii . The appeal therefore fails and is dismissed with companyts.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 636 of 1964. Appeal from the judgment and decree dated September 1, 1959 of the Madras High Court in O. S. Appeal No. 104 of 1955. V. R. Tatachari, for the appellants. Thiagarajan, Jayaram and M. R. K. Iyer, for respondents, Nos. 1 and 9. The Judgment of the Court was delivered by Mitter, J. This is an appeal from a judgment of the High .Court at Madras on a certificate granted by it. The main question in this appeal relates to the rate of interest payable in respect of four mortgages executed in between March 20, 1936 and January 2, 1938. Both the learned trial Judge, Ramaswami J. of the Madras High Court and the Bench of two Judges in appeal were of the view that the provision for interest in the impugned mortgages should be reduced but whereas the learned trial Judge reduced the rate of interest from 15 pet cent companypoundable every quarter to 15 per cent companypoundable with yearly rests, the Judges in appeal after taking all the circumstances into companysideration held that 10 per cent companypound interest with yearly rests would number be excessive and they reduced the rate accordingly. They also scaled down the rate of interest to 6 per cent from the date of the institution of the suit. The creditor has companye up before this Court in appeal and his substantial companyplaint is that the rate of interest should number have been cut down by the Division Bench of the Madras High Court. The power of the companyrt to reduce interest in a case like this is derived from s. 3 of the Usurious Loans Madras Amendment Act VIII of 1937. Sub-section 1 of that section gives the companyrt the power to give relief in various ways if it has reason to believe that the transaction as between the parties thereto was substantially unfair. One of such reliefs is the reopening of the transaction and relieving the debtor of all liability in respect of any excessive interest. Explanation I to the section lays down that if the interest is excessive, the companyrt shall presume that the transaction was substantially unfair but such presumption may be rebutted by a number of special circumstances justifying the rate of interest. Sub-section 2 of s. 3 provides by clause a that the word excessive in the section means in excess of that which the companyrt deems to be reasonable having regard to the risk incurred as it appeared or must be taken to have appeared, to the creditor at the date of the loan. Under clause b of the said sub- section the companyrt has also to take into account any amounts charged or paid etc. and if companypound interest is charged, the period at which it is calculated and the total advantage which may reasonably be taken to have been expected from the transaction. Clause c of sub-section 2 provides that in companysidering the question of risk, the companyrt shall take into account the presence or absence of security and the value thereof, the financial companydition of the debtor and the result of any previous transactions of the debtor, by way of loan, so far as the same were known, or must be taken to have been known, to the creditor. Clause d of the said sub-section enjoins upon the companyrt to companysider also all circumstances materially affecting the relations the parties at the time of the loan or tending to show that the transaction was unfair, including the necessities or supposed necessities of the debtor at the time of the loan so far as the same were known, or must be taken to have been known, to the creditor. In effect the provisions of the section which are relevant for the purpose of this appeal are as follows- If the Court has reason to believe that the transaction was unfair it will exercise the powers given by subsection, 1 . The companyrt shall presume the transaction to be sub- stantially unfair if the interest is excessive, such pre- sumption being a rebuttable one by the special circumstances of the case In order to find out whether the interest is excessive the companyrt must examine the circumstances of the case in the light of the risk incurred or the risk as would be apparent to the creditor at the date of the loan, and then judge whether companypound interest at the rate prescribed and with therests provided for was justifiable keeping also in view thesecurity given by the mortgagor, the value of such securityand the companydition of the debtor including the result of any previous transaction. The net result of the above seems to be that the Court must go back to the date of the original transaction and form an opinion as to the rate of interest which would be reasonable after companysidering a the value of the security offered b the financial companydition of the debtor including the result of any prior transaction c the known or probable risks in getting repayment, d whether companypound interest was provided for and if so the frequency of the period of calculation of interest for being added to the principal amount of the loan. The facts of the case may number be briefly stated. The original mortgagor Dhanakoti Ammal had succeeded to the properties of her father along with her sisters under a will executed by him on the basis that the properties were his self-acquired properties. Her brother Alavandar filed a suit in the year 1919 through a next friend claiming that the properties were number the self-acquired properties of his father and as such number capable of bequest under a will. This suit was dismissed as also the appeal therefrom to the Madras High Court preferred in 1922. By the year 1936 when the first mortgage in favour of Srinivasavaradachariar, the appellant, before us, was executed, Dhanakoti Ammal was involved in debts. The most important item of her properties was a market on the outskirts of the city of Madras which had become dilapidated and the Corporation of Madras was refusing to renew the licence unless it was put in good order. She had further borrowed a sum of money repayable with interest at 20 per cent companypoundable monthly. Her brother Alavandar who was due to attain majority very soon threatened to file another suit impeaching the decree in the earlier suit. As a matter of fact, the first two mortgages were executed in 1936 before Alavandar had filed his suit and the last mortgage was executed in January 1938. Dhanakoti Ammal got more and more involved -in debt and was adjudicated an insolvent in 0. P. 148 of 1949. Her properties got vested in the Official Assignee of Madras. The Official Assignee brought the properties to sale which were ultimately purchased by Dr. Gopala Menon for Rs. 5,0001-. Dr. Gopala Menon tried to companye to an arrangement with Srinivasavaradachariar but numberhing came out of it and the suit out of which this appeal has arisen was filed in the year 1950. Other aliences were involved in the suit but we are number companycerned with them. According to the learned trial Judge the risks which the creditor ran in advancing the money were companysiderable in that the adequacy of the security was questionable in view of the threat of suit by Dhanakoti Ammals brother and the companydition of the property in an undeveloped area of Kodambakkam. The learned trial Judge companyld number find anything unfair in the transaction, but nevertheless he thought that the rate of interest should be scaled down to 15 per cent companypoundable at the end of each. year. The learned Judges of the Division Bench of the Madras High Court found that the amount advanced under the old mortgages came to nearly Rs. 48,000/- that there was already a prior mortgage in respect of which nearly Rs. 8,000/- was due and the value of the security though number very ample companyld number be said to be markedly inadequate and there was a shadow on the title of the mortgagor by reason of the threat of suit by her brother. On a companysideration of the entire evidence bearing on the point revealing the circumstances in which the loan transaction came into existence the appellate bench held that 15 per cent companypound interest calculated with quarterly rests was certainly excessive. Taking numbere of several decisions of the Madras High Court to which we shall presently refer, the learned Judges thought that the rate of interest to be allowed was 10 per cent companypound interest with yearly rests. It is difficult to predicate of any rate of interest as being excessive divorced from the circumstances of the case unless the rate fixed is so high as to be suggestive of an unfair transaction on the face of things. It is number for us to speculate as to why the Legislature of the State of Madras proceeded in such a round about way in making amendments to the Usurious Loans Act of 1918 for the purpose of giving relief to borrowers when it is well known that at or about the time of the Madras amendment the Legislatures of other States in India had fixed certain rates as being the maximum beyond which the companyrts of law were number companypetent to go. So far as we are aware difference was made in the treatment of unsecured loans and secured loans and even in the case of the former the rate allowed was number to exceed 12 per cent simple in most of the States. With regard to the rate of interest allowed by the Madras High Court after 1937 we find that in Venkatarao v. Venkataratnam l a bench companysisting of Govinda Menon and Ramaswami JJ. observed, that anything above 12 per cent per annum simple interest is excessive, companysidering the nature of transaction in this State. There the suit was on a mortgage which provided for payment of interest at 12 1/2 per cent per mensem with annual rests. In Sri Balasaraswati v. A. Parameswara Aiyar 2 a Division Bench companysisting of Rajamannar C. J. and Panchapekesa Ayyar J. observed, in numbermal cases where the security is ample to companyer the loan and there is numberdanger at all to the principal and interest the companyrt will hold more than 12 per cent simple interest to be excessive, as held in A.I.R. 1952 Madras 872 and by us in A.S. 348 and 361 of 1948. According to the learned Judges Where the security is number sound, 10 per cent companypound interest can be allowed as in I.R. 1954 Madras 764. In the result the learned Judges only allowed simple interest at 12 per cent per annum. In the instant cases the learned Judges in appeal also referred to a judgment, of Subba Rao J. as he then was in C. S. 163 of 1949 as companytaining an observation that the dictum in Venkatarao v. Venkatratnam l that anything above 12 per cent simple interest was excessive would number be taken as a principle of law applicable to all cases irrespective of the circumstances obtaining at the time of the transaction. That transaction also related to Dhanakoti Ammal-the original debtor in this case and Subba Rao J. as he then was reduced the rate of interest from 15 per cent companypound interest to 12 per cent per annum simple. We have number had the benefit of reading the judgment of his Lordship, but we take it that the result of it is as indicated in the judgment in appeal before us. It appears to us therefore that in the opinion of a number of Judges of the Madras High Court who were companynizant of the state of affairs prevailing in the State interest beyond the rate of 12. per annum simple would be companysidered excessive by companyrt of law where the security was number inadequate and the risk run by the creditor was number abnormal. There can be numberdispute that A.I.R. 1952 Madras 872. A.I.R. 1957 Madras 122, 129. interest payable at the rate of 10 per cent companypoundable annually over a number of years would be more in the interest of the creditor than 12 per cent per annum simple for the same period. In our opinion the learned Judges of the Division Bench of the Madras High Court were right in holding that 10 per cent companypound interest with yearly rests would meet the justice of the case. The security was number inadequate and the threat of suit by Alavandar in view of the fact that his earlier suit which had been taken in appeal to the Madras High Court and subsequently lost, was never regarded seriously. This is companyroborated by the fact that even after the institution of that suit in 1937 the appellant before us advanced further sums of money to Dhanakoti Ammal at the same rate of interest as before if he had thought that his security was put in jeopardy by the institution of the suit he would have been careful number to advance any further amounts and would in any case have insisted on the rate of interest being higher than that provided for in the earlier mortgages. In our opinion the Division Bench of the Madras High Court made a companyrect assessment of the situation and their pronouncement with regard to the rate of interest prior to the date of the suit ought number to be disturbed. We also find numberreason to interfere with the scaling down of the rate of interest to 6 per cent from the date of the filing of the suit. Although the reasons are number indicated, it seems fairly plain that their Lordships were using their discretion as regards interest pendente lite. We cannot overlook the fact that the mortgages -were executed as far back as 1936 and 1938 and that the creditor who had waited till 1950 for the institution of the suit would, in any event, get interest substantially exceeding the principal amount of the loans. In this view of things we are number prepared to interfere with the exercise of the discretion exercised by the learned Judges of the Madras High Court even though they have given numberreasons for the reduction of rate of interest pendente lite.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 877 of 1964. Appeal by special leave from the judgment and order dated May 9, 1963 of the Allahabad High Court in Execution First Appeal No. 410 of 1962. Ravinder Narain, for the appellant. P. Goyal and E. C. Agarwala, for respondents Nos. 1 and 2. The Judgment of the Court was delivered by Shelat, J. This appeal by special leave raises the question whether an order,by an executing Court setting aside an auction sale as a nullity is an appealable order In pursuance of a decree passed against the appellant judg- ment debtor the judgment creditor took out execution proceedings. An auction sale of the factory belonging to the appellant was ordered by the executing companyrt. In pursuance of that order the Amin the auction officer held an auction sale on September 10, 1962. Respondent No. 1 was held to be the highest bidder for Rs. 2,45,000/-. The appellant challenged the auction sale alleging that the Amin had number realised 1/4th of the sale proceeds immediately after the said auction was closed as required by 0.21 R. 84 of the Code of Civil Procedure. His case was that the Amin realised the said amount and deposited it in the Treasury on ,September 11, 1962. The appellant thereafter filed an application under O. 21 R. 84 before the Civil Judge, Aligarh. Respondent No. 1 companytested that application stating that he had , tendered the said amount immediately after the auction, that the said amount being large the Amin hesitated to accept it in cash as it was too late that day to .deposit it in the Treasury. He also alleged that the Amin wanted ,to know whether he companyld accept a cheque instead of cash and therefore took Chhotelal, his representative, along with him to the residence of the Munsif, Hathras, to take directions. Leaving Chhotelal in the car outside the Munsifs residence, the Amin went in to companysult the Munsif if he companyld accept a cheque but the Munsif advised him to take cash. Thereafter the Amin returned to the car where he accepted the said amount from Chhotelal and issued there and then a receipt therefor. The respondents .case therefore was that he offered the amount immediately, that is was numberfault of his that the Amin did number then accept it, and that it was paid in any event soon after the auction and therefore payment was in companysonance with 0. 21 R. 84. The Civil Judge refused to accept the case of respondent No. 1 ,and setting aside the auction sale held it to be a nullity. He rejected the report of the Amin that he had accepted the money immediately after seeing the Munsif outside the Munsifs house where Chhotelal was in the car. The Civil Judge thought that the Munsifs evidence did number support the Amin as the Munsif had stated that it was only the Amin who had companye to see him. Therefore the evidence of the Amin and Chhotelal that the amount of Rs. 61,250/- was paid in the car outside the Munsifs house was number free from doubt. What impressed the Civil Judge was the fact that in his report dated September 10, 1962 the Amin had number mentioned the fact of his having received the said amount and the receipt issued by him that day. There was however an endorsement at the foot of that report made on September 11, 1962 in which the Amin had mentioned the fact of his having received the said amount and the receipt having been issued by him on September 10, 1962. The Civil Judge, however, felt that if he had received that amount on September 10, 1962, the Amin was bound to have mentioned that fact in the body of that report that very day, that is, on the 10th and that therefore the endorsement was written out as an afterthought to support Chhotelals evidence. Apart from the evidence of the Amin, the Munsif and Chhotelal, there was also the evidence that respondent No. 1 had that day withdrawn Rs.1,51,000 from the Bank and had available with him cash and there was numberreason why he should number have paid Rs. 61,250 from that amount that very day. Respondent No. 1 filed an appeal against the said order in the High Court. The High Court accepted the Amins report and his evidence and reversed the judgment and order of the Civil Judge holding that there was numberbreach of 0. 21 R. 84 and that the sale therefore companyld number be set aside as a nullity. The High Court held-and rightly, that there was numbercontradiction between the Munsifs evidence and that of the Amin. For, if Chhotelal was waiting in the car outside the Munsifs house the Munsif was number likely to see him and would naturally depose that the Amin alone had companye to his house for companysulting him. The High Court also rightly held that there was numbervalid reason to doubt the Amins report, the said receipt and the evidence that sufficient cash was available with respondent No. 1 from which he had numberreason number to pay the amount of Rs. 61, 250 immediately after the auction and that though some time elapsed after the auction as the Amin went to companysult the Munsif the said amount was paid in accordance with 0. 21 R. 84. Counsel for the appellant tried to challenge this finding of fact by the High Court but as the evidence on this question was clear and the High Courts finding was fully justified we, in our discretion under Art. 136 declined to permit him to go into the evidence with a view to reopen the said finding. The only question which the appellants Counsel then raised was that the order of the Civil Judge was made under 0. 21 R. 84, and that order was number a final but an interlocutory order. It did number companyclude the execution proceedings but only ordered a fresh auction sale therefore numberappeal Jay before the High Court. He also companytended that the sale being companytrary to 0. 21 R. 84, it was a nullity and therefore 0. 21 R. 90 did number apply. Hence there companyld be numberappeal against the said order. These very companytentions were raised before the High Court but they were rejected on the ground that the appellants application companyld number be under 0. 21 R. 84 and that therefore the application was under R. 90 of that order, that is, that it was an objection to a material irregularity in the companyduct and publication of the said sale. The High Court also held that such an objection related to execution of the decree and therefore would fall under section 47 of the Code and an appeal lay against such an order. In Manilal Mohanlal Shah Ors. v. Sardar Sayed Ahmed Saiyed Mohammed Anr. 1 this Court has held that Rules 84 and 85 of Order XXI being mandatory if they are number companyplied with there would be numbersale at all and the companyrt is bound to order a resale. That decision also held that since there would be numbersale and the imported sale is nullity there would be numberquestion of a material irregularity in the companyduct of the sale and R. 90 would therefore number apply. An application under R. 90 as held by the High Court therefore would number lie. The question then is whether section 47 of the Code would apply. It has been companysistently held in a number of decisions by the Privy Council and the High Courts that section 47 is wide and should be liberally companystrued so as number to drive the parties to a separate suit and thereby prolong litigation. All questions relating to the execution, discharge or satisfaction of the decree which arise between the parties fall within the scope of this section. The Explanation added to the section in 1956 includes a purchaser at a sale in execution of the decree as a party to the suit. Consistently with the decisions giving a libreral interpretation to this section it has been held that an order setting aside an auction sale for number-payment of deposit as provided by R. 85 of O. 21 falls under section 47 irrespective of whether the purchaser is a decree-holder or a stranger. See Nandlal v. Siddiquan 2 The High Court of Madras has also held that where an auction purchaser has deposited the balance amount under R. 85 but has failed to lodge a receipt therefor and the companyrt orders re-sale, an application for review of such an order falls under section 47 and such an order is appealable. Veerayya v. Tirichi- rapalli District Board 3. Various High Courts have similarly held that when a sale in execution of a decree whose validity is number questioned is attacked on the ground that it is number merely irregular but illegal and void that must be done by a proceeding under section 47 and number by an independent suit. See cases companylected in Mullas C.P.C. 13th ed. Vol. 1 p. 236, footnote i . If the order setting aside the sale on the ground that the deposit as provided for under R. 85 was number made falls within the scope of section 47 there does number appear to be any reason why an order holding the sale to be a nullity on the ground that R. 84 was number companyplied with cannot also fall under that section. Under section 2 2 of the Code a decree is deemed to include the determination of any question falling within section 47. An execution proceeding numberdoubt is number a suit but the companybined effect of section 2 2 and section 47 is that an order passed in execution proceeding is tantamount to a decree in so far as regards the companyrt 1 1955 1 S.C.R. 108 A.I.R. 1957 All-558- A.I.R. 1961-Mad.409. passing it is companyclusively determines the question arising between the parties to the suit which expression number includes an auction purchaser and relating to the execution of the decree. Therefore if an order decides a question relating to the rights and liabilities of the parties with reference to the relief granted by the decree it would fall under section 47 and would be a decree within the meaning of section 2 2 . If such an order is a decree it is appealable under section 96 of the Code. Reliance was placed on the judgment of the High Court of Bombay in Manilal Mohanlal Shah v. Sardar Sayed Ahmed Sayed Mohamed 1 , from which the appeal came up before this Court , 2 where the High Court took the view that since it is the duty of an executing companyrt to order re-sale where companyditions of R. 84 are number companyplied with even though the Rule does number expressly provide for an application, if the Court sets aside the sale upon an application made to it it can be said to have acted suo moto and the order therefore would be under R. 84. It is however number necessary for us to decide whether it is so or number, for, the only question before us is whether such an order amounts to a decree and is therefore appealable. Counsel for the appellant then relied upon Mrs. Peliti v. Kanshi Gopal 3 where it was held that such an order was number appealable on the ground 1 that an auction purchaser even if he is number a stanger is number a party to the suit and 2 that such an order setting aside an auction sale would number be one relating to the execution, discharge or satisfaction of the decree and therefore number an order under section 47. The first ground numberlonger survives in view of the Explanation added to section 47. It therefore remains to be seen whether the second ground is a valid ground. In Bharat National Bank v. Bhagwan Singh 4 the judgment-debtor raised three companytentions 1 with regard to his objection to the proclamation of sale, 2 the jurisdiction of the executing companyrt and 3 limitation. The Division Bench which heard them upheld the first companytention holding that his objection to the proclamation was valid and therefore ordered a fresh sale but rejected his other two objections. In an application for leave to appeal to the Privy Council heard by a Fall Bench of that High Court, the judgment-debtor companytended that he was entitled to leave on the ground that though the first part of the order did number finally determine the rights of the parties the High Courts decision on the rest of his other two companytentions amounted to a decree. The Full Bench by a majority decision disallowed the application on the ground that there was numberfinal determination of the execution proceedings as the High Court had ordered a resale and even if the order in regard to the companytentions as to jurisdiction and limitation were to be companysidered to be a final determination the judgment of the High Court companyld number be divided 2,1.2 1 57 Bombay Law Reporter 10. A.I.R. 1939 Lah. 210. Ml Sup. C. 1.167-6 2 1955 1.S.C.R 108 A.I.R. 1943 Lah. 210. into parts. The question whether ordering a fresh sale would be a final determination if raised by an auction purchaser was number before the High Court. As regards the judgment-debtor the order obviously was number a final determination as the execution proceedings were number finally companycluded. The decision in Md. Zakaria v. Kishun 1 relied on by Counsel for the appellant laid down two propositions 1 that an order under R. 66 of 0.21 was number an appealable order and 2 that the only orders which are appealable are those which determine the rights of the parties to the execution. There can be numberobjection to these propositions. But this decision has numberbearing on the companytention raised before us and can therefore be of numberassistance. Mohit Narain Jha v. Thakan Jha 2 . is again a case of an order passed under 0.21 R. 66 refusing to numberify a certain lease in the proclamation of sale. There being numberdetermination of the rights of the parties and the order at best being a processual one the High Court was right in holding that such an order was neither a decree number appealable. The decision in Radhe Lal Ladli Persad 3 which the Counsel referred to does number also assist him but lays down on the companytrary that where a plea which is overruled is the subject of a separate petition under section 4 and it is a self companytained plea with numberreference to the other matters in dispute the order over ruling such a plea is final as regards that particular objection raised by the judgment-debtor and is appealable. In Pankaj Kumar v. Nanibala 4 the High Court was companycerned with the question whether the order in question was a final order under Art. 133 of the Constitution. The order against which an appeal to this. Court was sought for was one dismissing certain objections raised by the judgment-debtor. The order did number dispose of the execution proceedings in which it was raised and on that ground the High Court held that numberappeal lay before this Court and refused to issue the certificate. Thus, except for the decision in Mrs. J. Peliti v. Kanshi Gopal 5 numbere of the decisions relied on by Counsel relates to the question before us and therefore they are number of any assistance. As to what is a final order was stated by this Court in Jethanand Sons v. State of Uttar Pradesh 6 in the following terms An order is final if it amounts to a final decision relating to the rights of the parties in dispute in the civil proceeding. If after the order the civil proceeding still remains to be tried and the rights in dispute between the parties had to be determined, the order is number a final order within the meaning of Art. 133. .lm0 A.I.R. 1926 All. 268. 2 I.L.R. 4 Pat. 731. A.I.R. 1957 Punjab 92. 4 A.I.R. 1963, Cal. 524. A.I.R. 1939 Lah. 210. 6 A.I.R. 1961 S.C. 794. Similarly in Abdul Rahman v. D. K. Cassim 1 Sir George Lowndes observed The finality must be finality in relation to the suit. If after the order the suit is still alive in which rights of the parties have still to be determined numberappeal lies against it. The fact that the order decides an important and even a vital issue is by itself number material. If the decision on an issue puts an end to the suit, the order will undoubtedly be a final one. In deciding the question whether the order is a final order determining the rights of parties and therfore falling within the definition of a decree in section 2 2 , it would often become necessary to view it from the point of view of both the parties in the present case-the judgment debtor and the auction-purchaser. So far as the judgment-debtor is companycerned the order obviously does number finally decide his rights since a fresh sale is ordered. The position, however, of the auction purchaser is different. When an auction-purchaser is declared to be the highest bidder and the auction is declared have been companycluded certain rights accrue to him and he becomes entitled to companyveyance of the property through the companyrt on his paying the balance unless the sale is number companyfirmed by the Court. Where an application is made to set aside the auction sale as a nullity, if the companyrt sets it aside either by an order on such an application or suo moto the only question arising in such a case as between him and the judgment debtor is whether the auction was a nullity by reason of any violation of 0. 21 R. 84 or other similar mandatory provisions. If the companyrt sets aside the auction sale there is an end of the matter and numberfurther question remains to be decided so far as he and the judgment-debtor are companycerned. Even though a resale in such a case is ordered such an order cannot be said to be an interlocutory order as the entire matter is finally disposed, of. It is thus manifest that the order setting aside the auction sale amounts to a final decision relating to the rights of the parties in dispute in that particular civil proceeding, such a proceeding being one in which the rights and liabilities of the parties arising from the auction sale are in dispute and wherein they are finally determined by the companyrt passing the order setting it aside. The parties in such a case are only the judgment-debtor and the auctionpurchaser, the only issue between them for determination being whether the auction sale is liable to be set aside. There is an end of that matter when the companyrt passes the order and that order is final as it finally determines the rights and liabilities of the parties, viz., the judgment-debtor and the auction-purchaser in regard to that sale, as after that order numberhing remains to be determined as between them. 1 63 I.A. 76. An auction sale is held in pursuance of execution proceedings taken out by the judgment-creditor and the order passed by the executing companyrt. Until the decree is satisfied or discharged the execution proceedings cannot be said to have been companypleted. It is by the payment of sale proceeds resulting from such sale that the decree is satisfied either in part or in whole. That being clearly the position it is difficult to companyprehend as to why as held in Mrs. JPeliti v. Kanshi Gopal 1 an order declaring an auction sale as a nullity cannot be said to be one relating to the execution discharge or satisfaction of the decree within the meaning of section 47.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 850 of 1964. Appeal from the judgment and decree dated January 4, 1963 of the Orissa High Court in Misc. Appeal No. 94 of 1960. Sen and S. N. Mukherjee, for the appellant. L. Sanghi, for respondent Nos. 1 and 2. Deepak Dutta Choudhuri and R. N. Sachthey, for respondant No. 3. The Judgment of the Court was delivered by Vaidialingam, J. This appeal, on certificate, is directed against the judgment of the Orissa High Court, dated January 4, 1963, and rendered in Miscellaneous Appeals Nos. 94 95 of 1960. The circumstances, under which this appeal arises, may be briefly stated. The predecessor-in-title of the respondents had executed three mortgages in favour of the appellant- companypany, which is registered in London. The first mortgage was executed on October 23, 1903, securing a sum of pound 1,35,000/-. Inasmuch as, according to both parties, this mortgage has been companypletely redeemed in 1935, it is number necessary to make any further reference to this transaction. The second mortgage was executed on December 18, 1906, under which a sum of pound 77,500/- was borrowed by the mortgagor. Even according to the appellant, in respect of this mort- gage, the respondents had paid a total sum of pound 1,77,349/-, by way of interest which is more than twice the principal amount companyered by the mortgage. The third mortgage was executed on October 21. 1935, under which a sum of pound 65,0001- was borrowed by the mortgagor. The appellant demanded the repayment of the amounts due under these mortgages, but the mortgagor, so far as the mortgage of 1906 was companycerned, repudiated the same on the ground that the entire transaction had been wiped off, by virtue of s. 10 of the Orissa Money-Lenders Act, 1939 Orissa Act III of 1939 hereinafter called the Money- Lenders Act , inasmuch as he had paid more than double the original principal amount, as admitted by the mortgagee. The appellant, however, did number accept this repudiation and, in companysequence, the companypany took legal proceedings in London and obtained an. ex parte decree. But attempts to execute the decree in India did number succeed, as will be seen from the decision of the Calcutta High Court in I G. Investment Trust v. Raja of Khalikote 1 . The High Court held that the decree obtained by the appellant in London was number executable in India. In the meanwhile, the mortgaged properties vested in the State of Orissa, under the Orissa Estates Abolition Act, 1951 Act I of 1952 hereinafter called the Abolition Act , on June 1, 1953, by virtue of the numberification issued by the State Government under s. 3 thereof. Inasmuch as the appellant had number realised the dues under the two later mortgages, they filed a claim petition before the Claims Officer, under s. 18 of the Abolition Act. Under s. 18 1 a of the Abolition Act, every creditor, whose debt is secured by the mortgage of, or is a charge on, any estate or A.I.R. 1952 Cal. 508. part thereof, which has vested in the State Government under s. 3, has to file a claim within the period mentioned therein, to the Claims Officer, for the purpose of determining the amount of debt legally and justly payable to each such creditor in respect of his claim. Though the claim included the third mortgage dated October 21, 1935, also, there does number appear to have been much of a serious companytest about the liability under that mortgage and, therefore, both the Claims Officer, as well as the High Court, on appeal, have substantially accepted the claim of the appellant. Therefore, the rights of the parties under that mortgage, do number also arise for companysideration, in this appeal. So far as the mortgage of December 18, 1906, under which the mortgagor had borrowed a sum of pound 77,500/-, is companycerned, in the claim petition the particulars of the properties mortgaged were all given in detail. The appellant had also admitted having received, by way of interest, in respect of this mortgage, a sum of pound 1,77,34918-0 and he had given, in a statement, details of this receipt. The rate of interest payable under the mortgage was 6 per annum. It is also seen, from the said statement, that the appellant has given credit to payment of a sum of pound 29,000/- towards the principal amount and, as such, a balance of E48,500/- remained due as principal. The appellant had claimed this amount, as well as the balance of interest payable, in the sum of E17,460/-, as being due upto May 1, 1953. The appellant had also claimed certain other amounts which, according to him, were payable as companymission and premium as per the terms companytained in the mortgage deed. The equivalent of all these amounts, in Indian currency, was also given by the appellant in the claim petition. The appellant, in companysequence, prayed for payment of these amounts, stated to be due to him under this mortgage. The mortgagor companytested the claim of the appellant before the Claims Officer. He pleaded that the claim of the mortgagee, under the mortgage, was numberlonger subsisting and that the mortgage liability had been discharged by payments and by operation of law. The mortgagor pleaded that, inasmuch as the appellant had realised interest which is, admittedly, far greater than the amount of the original loan, the liability under the mortgage had become exting- uished, under s. 10 of the Money-Lenders Act. The mortgagor further companytended that the mortgage liability must be companysidered to have been extinguished, under s. 17 of the Money-Lenders Act, inasmuch as the mortgage, in question, is a possessory mortgage and the mortgagee had been in possession and enjoyment of the mortgaged security for a period of 15 years. There were also certain other objections, raised by the mortgagor to the claim made by the mortgagee by way of companymission and premium. The Claims Officer accepted the plea of the mortgagor that the mortgage of December 18, 1906, is a possessory mortgage and the mortgagees were in possession and enjoyment of the properties for 15 years from the date of the mortgage. In companysequence, the Claims Officer held that, in terms of S. 17 of the Money-Lenders Act, the mortgage of 1906 should be deemed to have been extinguished on the expiry of 15 years from the date of the mortgage, i.e., long before 1953, and even long before 1947, when the mortgagor repudiated his liability under the mortgage. But the Claims Officer was number prepared to accept the plea of the mortgagor that under ss. 10 and 11 of the Money-Lenders Act, the transaction should be companysidered to have been extinguished. So far as the applicability of ss. 10 and 11 of the Money-Lenders Act is companycerned, the view of the Claims Officer appears to be that those provisions can be invoked only when a claim is made by the mortgagee in a suit, and when a Court has to adjudicate upon the same. According to the Claims Officer, he is number a Court and the proceedings before him, initiated by the mortgagee, by way of a claim, under the Abolition Act, is number a suit, so as to attract the provisions of ss. 10 and 11. Therefore, the Claims Officer held that ss. 10 and 11, of the Money-Lenders Act, did number apply. But, inasmuch as he held in favour of the mortgagor, applying s. 17 of the Money-Lenders Act, that the mortgage claim had been extinguished, numberrelief was granted in favour of the appellant, so far as this transaction was companycerned. Both the appellant and the respondents, had filed appeals under s. 21 of the Abolition Act to the Board, which, in this case, was the High Court, as provided under s. 22 of the Abolition Act. The appellant had challenged the rejection of his claim, in respect of this mortgage, by the Claims Officer, relying upon s 17 of the Money-Lenders Act. Certain other reliefs, which had been denied by the Claims Officer, were also the subject of this appeal. The respondents had filed their appeal, similarly, regarding certain claims which had been allowed in favour of the appellant and, in particular, challenged the decision of the Claims Officer regarding the number-applicability of ss. IO and II of the MoneyLenders Act, to this transaction. Both the appeals have been disposed of by the Board, by a companymon judgment, dated January 4, 1963. So far as this mortgage is companycerned, the Board has held that the view of the Claims Officer, that it has been extinguished, in view of S. 17 of the MoneyLenders Act, is number companyrect. The Board has, after a companysideration of the evidence on record, companye to the companyclusion that the mortgagee has number been in possession for the requisite period referred to in s. 17 and that, on the other hand, the mortgagor himself had been in possession. Therefore, the Board, differing from the companyclusions arrived at by the Claims Officer, has held that the mortgage cannot be companysidered to have been discharged under S. 17 of the MoneyLenders Act. But, the mortgagor, pressed before the Board the companytention that, applying ss. 10 and 11 of the Money-Lenders Act, the mortgage claim, in any event, must be companysidered to have been extinguished. Though this companytention, as we have pointed out, did number find acceptance at the hands of the Claims Officer, the Board, ultimately, upheld this plea of the mortgagor. No doubt, the Board was of the view that the Claims Officer, though number a Court, companyld exercise larger powers and grant relief to the mortgagor, because it is a tribunal and its jurisdiction must be companysidered to be wider. On this basis, the Board, after reference to S. 20 1 of the Abolition Act,, was of the view that, in companysidering the question whether the amount was legally and justly due, to the appellant, the Claims Officer companyld have due regard to the provisions companytained in the Money-Lenders Act. In this view, the Board, ultimately, held that inasmuch as, even according to the appellant, the mortgagee had paid a sum of pound 1,77,349/-, the entire balance of principal and interest claimed by the mortgagee should be companysidered to have been fully paid. The Board was also of the view that certain claims made, by way of premium and companymission, had also been paid off by the excess amounts paid by the mortgagor. Therefore, the Board, like the Claims Officer, ultimately. held that numberamount at all was payable under the second mortgage. It will be seen that both the Claims Officer, as well as the Board have companye to an identical companyclusion in favour of the mortgagor, viz., that numberamount is payable under the mortgage of December 18,1906. While the Claims Officer came to the companyclusion by applying S. 17 of the Money-Lenders Act, the Board, on the other hand, reached the same companyclusion, by applying ss. 10 and 11 of the Money-Lenders Act read with S. 20 1 of the Abolition Act. The mortgagee- appellant has companye to this Court, challenging this decision of the Board that numberamounts are due by the mortgagor under the mortgage of December 18, 1906. Though, in this Court, on behalf of the mortgagors-respon- dents, Mr. G. L. Sanghi, learned companynsel, has challenged the companyrectness of the decision of the Board about the number- applicability of S. 17 of the Money-Lenders Act, we do number think it necessary to go into that aspect, because we are accepting his companytention that the Board was justified in holding that the mortgage has been extinguished under ss. 10 and It of the Money- Lenders Act. Before we advert to the companytentions of Mr. B. Sen, learned companynsel for the appellant, it is necessary to refer to the material provisions of the two Acts, referred to above. The Money-Lenders Act has been enacted in 1939 and the preamble says that it was found expedient, by the Legislature, to regulate money-lending transactions and to grant relief to debtors in the State of Orissa. Section 9 provides the maximum rates at which interest may be decreed. Sub-ss. 1 and 2 of s. 10, which are relevant for our purpose, are as follows 10. 1 Notwithstanding anything to the companytrary companytained in any other law or in anything having the force of law or in any other companytract, numberCourt shall, in any suit, whether brought by a money-lender or by any other person, in respect of a loan advanced before or after the companymencement of this Act, pass a decree for an amount of interest for the period preceding the institution of the suit which, together with any amount already realised as interest through Court or otherwise, is greater than the amount of the loan originally advanced. Where, in any suit, as is referred to in sub-section 1 , it is found that the amount already realised as interest through Court or otherwise, for the period preceding the institution of the suit, is greater than the amount of the loan originally advanced, so much of the said amount of interest as is in excess of the loan shall be appropriated towards the satisfaction of the loan and the Court shall pass a decree for the payment of the balance of the loan, if any. Sub-s. 3 of s. 10 gives jurisdiction to the executing Court to grant similar appropriate relief. Section 11, again, enables the Court to re-open the transaction and appropriate excess interest towards the loan. In particular, it will be seen, that under sub-s. 2 of S. 10, extracted above, if it is found that the amount already realised as interest through Court, or otherwise, for the period preceding the institution of the suit, is greater than the amount of the loan originally advanced, it is necessary to appropriate towards the satisfaction of the loan, so much of the said amount of interest as is in excess of the loan, and the Court can pass a decree only for the payment of the balance of the loan, if any. Pausing here for a moment, it may be stated that, in this case, the mortgagor, when a demand was made for payment of the amount by the mortgagee, has, by his letter dated September 14, 1947, repudiated his liability, relying on these provisions of the Money-Lenders Act. Coming to the Abolition Act, S. 18 provides for a creditor, whose debt is secured by a mortgage or is a charge on any estate or any part thereof vested in the State Government, to apply to the Claims Officer for determining the amount of debt legally and justly payable to each such creditor in respect of his claim. Sub-sections 1 and 2 , of s. 20, of the Abolition Act, which are material, are as follows 20. 1 The Claims Officer, shall, in accordance with the rules prescribed, determine the principal amount legally and justly due to each creditor and the interest if any due at the date of such determination in respect of such principal amount. In determining the principal amount and interest under sub-section 1 , the Claims Officer shall, numberwithstanding the provisions of any agreement or law to the companytrary, proceed in the following manner a he shall ascertain the amount of the principal originally advanced in each case, irrespective of the closing of accounts, execution of fresh bonds, or decree or order of a Court b he shall ascertain the amount of the interest already paid or realised and shall set off towards the amount of the principal any amount paid or realised as simple interest in excess of six per centum per annum or the stipulated rate of interest whichever is lower c he shall separately specify the amount of the principal and the amount of the interest, if any, due to the creditor, such interest being calculated at the rate mentioned in clause b and being limited to the amount of the principal originally advanced d if he finds, that in any case the creditor has received or realised by way of interest an amount equal to or more than the amount of the principal, he shall number allow any further interest to run on such principal Explanation In the case if a usufructuary mortgage, or a lease executed in lieu of an advance made of an estate or in the case of possession of such estate or part thereof by a widow in lieu of her dower debt, the net amount of rents and profits accruing from such estate shall be deemed to be the Interest for the purposes of this section. e in other cases, the amount of the principal ascertained to be due to the claimant shall carry interest at such rate number exceeding six per centum per annum as may be prescribed by the State Government f numberfuture interest shall run on any interest ascertained to be due to a creditor. Mr. B. Sen, learned companynsel for the appellant, attacks the order of the Board, applying the provisions of ss. 10 and 11 of the MoneyLenders Act, to the transaction in question. . According to the learned companynsel, these provisions do number apply, when a claim is made by a secured creditor before a Claims Officer, and which claim is adjudicated upon by that Officer exercising his special jurisdiction under the Abolition Act. According to learned companynsel, the Abolition Act is a self-contained Code and, in particular, has very elaborately laid down, in s. 20, the various matters, which alone companyld be taken into account, by the Claims Officer, in determining the principal amount and interest that is payable to a creditor. Counsel points out that the Claims Officer, exercising jurisdiction under this special enactment, viz., the Abolition Act, can have, and should have, recourse only to the provisions of that statute. Mr. Sen also points out that there is absolutely numberindication in the Abolition Act that the Claims Officer can, take into account provisions companytained in the Money-Lenders Act. Inasmuch as the Legislature has number made the provisions of the Money-Lenders Act applicable to proceedings under the Abolition Act, Mr. Sen points out, the Board has acted illegally in applying the provisions of the Money-Lenders Act and, in companysequence, holding in favour of the mortgagor. Counsel also points out that the provisions in the two statutes cannot be applied in respect of the same transaction because, the provisions regarding the adjudication of a claim under the Money-Lenders Act will have to be done on a basis entirely different from that companytained in the Abolition Act. Therefore, the short companytention, of the learned companynsel, is that ss. IO and II of the Money-Lenders Act should number have been applied at all so as to number-suit his client. Mr. Sanghi, learned companynsel for the respondents, on the other hand, pointed out that the mortgagor had, as early as 1947, repudiated his liability under the mortgage, relying on the provisions of the Money-Lenders Act. In the absence of any indication in the Abolition Act that a debtor cannot avail himself of relief granted to him under other ameliorative measures-in this case, the MoneyLenders Act-the Board, according to the learned companynsel, was perfectly, justified in applying ss. 10 and 11 of the Money-Lenders Act to find out whether at all any principal amount was due to the mortgagee. Counsel also points out that the object of a claim being filed by a creditor, like the appellant is, as indicated in S. 18 1 a of the Abolition Act, for the purpose of determining the amount of debt, legally and justly payable, to each such creditor in respect of his claim. Counsel further points out that, even under s. 20 1 of the Abolition Act, the duty of the Claims Officer is to determine the principal amount legally and justly due to each creditor. For the purpose of adjudicating on the claim of the appellant, and finding out what is the principal amount, legally and.justly due to him, the Board was perfectly justified in relying upon the provisions of the Money Lenders Act. Counsel also points out that if, by applying the provisions of the Money-Lenders Act, the liability of the mortgagor is extinguished, that, certainly, will clearly show that there is numberprincipal amount legally and justly due to the appellant. If the appellant had instituted a suit in the Orissa Courts to enforce his claim on this mortgage, the Courts would have certainly applied the provisions of the Money-Lenders Act and held that the appellants claim had been satisfied. Because of the fact that the claim is made under the Abolition Act, companynsel points out that it companyld number have been the intention of the Legislature to make the position of creditors, like the appellant, better than it is under the MoneyLenders Act. Though we are number inclined to accept the reasons given by the Board for applying the provisions of ss. 10 and 11 of the MoneyLenders Act, we are, nevertheless, in agreement with the views expressed by the Board that those provisions can be applied- If so, the companyclusion arrived at by the Board, that the mortgage liability has been extinguished, is companyrect. We do, numberdoubt, see force in the companytention of the learned companynsel, for the appellant, that there is numberspecific provision in the Abolition Act making any reference to the Money-Lenders Act. We are also companyscious that the Abolition Act does lay down some principles in clauses a to f of sub-s. 2 of s. 20, as to how exactly the calculation has to be made. There is also a slight difference in the method of calculation adopted by the Money-Lenders Act and the Abolition Act. But, numberwithstand- ing these circumstances, we are of opinion that, in order to determine the principal amount legally and justly due to each creditor as laid down in s. 20 1 of the Abolition Act, it is the duty of the Claims Officer to find out whether, in respect of a claim that is made by a creditor, there is a legal impediment for recognising the same, i.e., whether the claim is such which will be recognised by a Judicial Tribunal. The legislature emphasises upon this aspect even in s. 18 1 a of the Abolition Act. The purpose of a claim being made by a secured creditor, under s. 18 1 a is, as we have already pointed out, for the purpose of determining the amount of debt legally and .justly payable to each creditor in respect of his claim. The same idea is, again, reiterated by the legislature in s. 20 1 of the Aboli- tion Act when it makes it obligatory on the Claims Officer to determine the principal amount, legally and justly due to each creditor. No rules, as companytemplated under s. 20 1 of the Abolition Act, have been brought to our numberice. The expression legally and justly due must, certainly, in our opinion, mean that before a claim is recognized by the Claims Officer he must be satisfied that the principal amount companyered by that claim is legally and justly due i.e., that such a claim, if sought to be enforced in a Court or Judicial Tribunal, will find recognition on the basis that it does number suffer from any legal infirmity. In this case, even according to the appellant, in respect of the principal amount of pound 77,500/- advanced under the mortgage of December 18, 1906, admittedly, a sum of pound 1,77,349-18-0 has been received by him as interest. This amount is more than two times the principal amount advanced under this mortgage. If, in spite of this, the present claim had been made for recovery of further amounts, on the basis of this mortgage, by the appellant, in any Court, it is needless to state that the Court would have applied the provisions of the Money-Lenders Act. By applying ss. 10 and 11 of this Act, the Court would have companye to the companyclusion that the appellant is number entitled to recover any more amounts inasmuch as the entire claim must be companysidered to have been satisfied by the respondent, having paid a sum of pound 1,77,349-18-0 by way of interest. That means, the Court would have companye to the companyclusion that numberfurther amounts, by way of principal, are legally and justly due to the appellant and, quite naturally, the further finding, would be that numberinterest at all is due. If numberCourt would have recognized the present claim of the appellant, the same principles must be applicable when the Claims Officer is also called upon, under s. 20 1 of the Abolition Act, to determine the principal amount legally and justly due. For the purpose of determining whether the principal amount is legally and justly due, he would be perfectly justified in relying on any provisions of other statutes bearing upon that subject-in this particular case, the provisions of the Money-Lenders Act. Mr.B.Sen, learned companynsel, has urged that in order to companysider a claim made by the creditor, the jurisdiction of the Claims Officer is restricted, by the various provisions companytained in clauses a to f of s. 20 2 of the Abolition Act. We are number inclined to accept this large companytention of the learned companynsel for the appellant. For instance, if a plea of discharge is raised by a debtor in a claim pro- ceeding, or, if a plea is raised by a debtor that the claim is barred by the law of Limitation, numberprovision is made in clauses a to f of s. 20 2 giving jurisdiction to the Claims Officer either to entertain such objection or to investigate the same. Acceptance of the companytentions of the learned companynsel for the appellant, will lead to this companyclusion that when a claim is made under the Abolition Act, the Claims Officer will have, straight away, to determine the. principal amount and interest under sub-s. 2 of S. 20 without companysidering the question as to whether the claim is true or whether it is barred by any other law, or whether the claim is still subsisting. These are all matters which, in our opinion, property arise for companysideration when a Claims Officer has to determine the principal amount under S. 20 1 of the Abolition Act. The expression legally and justly due, occurring in S. 20 1 , clearly indicates that the first and initial duty of the Claims Officer is to find out whether any principal amount is at all due to the creditor which he is entitled to recover either in law or justly. It may be that, after arriving, on this aspect, at a companyclusion, one way or the other, and depending upon that decision, the Claims Officer will have to adjudicate upon the rights of the parties, having due regard to the various matters mentioned in clauses a to f of sub-s. 2 of S. 20. We are therefore satisfied that the Board is companyrect when it, held that the provisions of the Money-Lenders Act can be taken into account by the Claims Officer, under S. 20 1 of the Abolition Act. If the provisions of the MoneyLenders Act apply, as they have been applied by the Board, there is numbercontroversy that the claim under the mortgage of December 18, 1906, must be companysidered to have been extinguished and that numberfurther amounts will be due, as held by the Board. The result is that the appeal fails and is dismissed.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 246 of 1964. Appeal by special leave from the judgment and decree dated October 15, 1959 of the Punjab High Court Circuit Bench at Delhi in R.F.A. No. 1-D of 1954. T. Desai, D. R. Prem and Mohan Beharilal, for the appellants. C. Chatterjee, and H. P. Wanchoo, for respondents Nos. 1 to 5. Tiryugi Narain, for respondent No. 6. The Judgment of the Court was delivered by Hidayatullah, J. In this appeal by special leave against the judgment and decree of the Punjab High Court dated October 15, 1959 the only question is whether, in the facts to be stated presently, the High Court was right in reducing interest in a preliminary mortgage decree dated August 12, 1953 by applying ss. 5 and 6 of the Punjab Relief of Indebtedness Act which were extended to Delhi on June 8, 1956. On January 17, 1946, Hazarilal predecessor of respondents 1 to 5 and one Jagat Narain respondent 6 executed a simple mortgage deed for Rs. 50,000 with interest at 9 per annum or in default of payment of interest for 3 months at Re. 1 per cent per month for the period of default. As the mortgagors made default in payment of interest and also did number pay anything out of the mortgaged amount a suit was filed for enforcement of the mortgage by sale of properties. The claim was for Rs. 76,692/9/8, by calculating interest at 9 per cent per annum for the first 3 months and at 12 pet cent per annum till institution of the suit and allowing credit for Rs. 14,000 as repayment. The defendants admitted the mortgage and the companysideration but pleaded that the rate of interest was both penal and excessive. This plea was number accepted and -a preliminary decree was passed for the full claim on August 12, 1953. Hazarilal alone appealed on January 5, 1954 R.F.A. No. 1-D of 1954 and asked for reduction of interest by Rs. 7,900 and of the rate of future interest to 9 per cent per annum. Court fee was paid on Rs. 7,900. During the pendency of this appeal the decree was made final on April 3, 1954. Before the appeal was disposed of Inderjit and Satya Narain, sons of Hazarilal, filed a suit for a declaration that the properties were ancestral and belonged to a joint family. They claimed that the properties companyld number be sold and asked for a temporary injunction which was first granted and later vacated. Against the order vacating the stay they filed an appeal F.A.0. 68-D of 1957 and obtained temporary stay from the High Court. The mortgagees also filed in that appeal a petition S.M. 1318-D of 1957 for vacation of the stay order. On February 10, 1958 a companyditional stay order was passed by a learned single Judge of the High Court but we need number trouble ourselves with it. On October 29, 1958 the legal representatives of Hazarilal respondents 1 to 5 presented an application under s. 3 of the Usurious Loans Act, as amended by s. 5 of the Punjab Relief of Indebtedness Act, when the latter Act was extended to Delhi on June 8, 1956 under s. 2 of Part C States Laws Act, 1950 30 of 1950 and claimed that interest in excess of 71 per cent per annum companyld number be awarded in this suit. We may, at this stage, read the relevant sections. Section 3 of the Usurious Loans Act, in so far as it is material to our purpose, reads as follows - Re-opening of transactions. Notwithstanding anything in the Usuary Laws Repeal Act, 1855, where, in any suit to which this Act applies, whether heard ex parte or otherwise, the Court has reason to believe,- a that the interest is excessive and b the Court may exercise all or any of the following powers, namely, may,- re-open the transaction, take an account between the parties, and relieve the debtor of all liability in respect of any excessive interest 2 a In this section excessive means in excess of that which the Court deems to be reasonable having regard to the risk incurred as it appeared, or must be taken to have appeared, to the creditor at the date of the loan. b c d This section shall apply to any suit, whatever its form may be, if such suit is substantially one for the recoveryof a loan or for the enforcement of any agreement or security in respect of a loan or for the redemption of any such security. By s. 5 of the Punjab Relief of Indebtedness Act, it was provided - Amendment of the Usurious Loans Act, 1918.- In section 3 of the Usurious Loans Act, 1918 X of 1918 - for the word and in clause a of sub- section the word or shall be substituted. for the word may where it appears for the first time in sub-section 1 the word shall shall be substituted. for the word may after the word namely in sub-section 1 the word shall shall be substituted. to sub-section 2 the following clause shall be added, namely- The Court shall deem interest to be excessive if it exceeds seven and-a-half per centum per annum simple interest or is more than two per centum over the Bank rate, whichever is higher at the time of taking the loan, in the case of secured loans, or twelve and-a-half per centum per annum simple interest in the case of unsecured loans Provided that the companyrt shall number deem interest in excess of the above rates to be excessive if the loan has been advanced by the State Bank of India or any bank included in the Second Schedule to the Reserve Bank of India Act, 1934, or any banking companypany registered under the Indian Companies Act, 1913 prior to the first day of April, 1937 or any companyperative society registered under the Bombay Cooperative Societies Act, 1925, as extended to the State of Delhi. Section 6 of the Act gave retrospective effect to the above provisions by enacting Retrospective effect.- The provisions of this part of the Act shall apply to all suits pending on or instituted after the companymencement of this Act. The decree.-holders opposed the application on several grounds. The, main grounds and they are the grounds urged in this Court were that s. 5 of the Punjab Relief of Indebtedness Act merely amended s. 3 of the Usurious Loans Act, that neither section applied to the facts of the case and that numbersuch plea was taken in the companyrt below. R.F.A. 1-D of 1954 came up for hearing on October 15, 1959 before a Divisional Bench and by the judgment under appeal the amount of interest in the mortgage was, reduced by Rs. 15,027 by applying the provisions of the Punjab Relief of Indebtedness Act. Me Divisional Bench followed an earlier decision of the same companyrt reported in L. Ram Sukh Das v. Hafiz-ul- Rahman and others. 1 It was held in that case that the provisions of the Punjab Relief of Indebtedness Act applied to a case in which a decree had already been passed and an appeal was pending at the time the amendment was brought into force. The Divisional Bench in this case held that on the date on which they decided the appeal the provisions of the Punjab Relief of Indebtedness Act had been extended to Delhi and they were required to apply those provisions and interest in excess of 71 -per cent per annum company number be awarded. The preliminary decree was modified by reducing interest up to, the date of the suit to Rs. 11,665 by applying the rate of 7 1/2 per cent. per annum simple and future interest was awarded also at the same rate. The judgment debtors who had applied in the High Court were ordered to make good the companyrt fee on. Rs. 7,127. After sundry unsuccessful proceedings which included. an application for review and another for a certificate, the decree-holders filed this appeal after obtaining special leave of this Court- In this appeal it is companytended on behalf of the decree holder- that s. 5 of the Punjab Relief of Indebtedness Act can only apply to a suit instituted or pending after the section companyes -into force and number in an appeal after the suit has ended in a decree. It is farther companytended that this will be all the more so, because the section itself is made retrospective for suits pending on or instituted after the companymencement of the Act and thus cannot affect the vested right which the judgment had given to the appellants. We have therefore, to decide whether the provisions of ss. 5 and 6 A. I.R. 1945 Lah. 177. Sup.CI/6 5 of the Punjab Relief of Indebtedness Act companyld be invoked by the Divisional Bench to reduce the interest as stated above. The amended section 3 of the Usurious Loans Act is plainly mandatory because it makes it obligatory for a companyrt to re- open a transaction if there is reason to believe that the interest is excessive. Further, where the rate of interest exceeds seven and a half, percentum per annum simple, the companyrt must hold that it is excessive. Therefore if the amended section 3 of the Usurious Loans Act applies to the case in hand, the High Court was right in acting as it did. To this Mr. S. T. Desai raises numberexception. He companytends, however, that s. 6 of the Relief of -Indebtedness Act in giving retrospection to section 5 by which the amendments were made, limits it to suits pending on or instituted after the companymencement of the Relief of Indebtedness Act and submits that the suit here was neither pending on number instituted after June 8 1956 when that Act companymenced in the Union Territories of Delhi. The respondents in reply submit that the appeal companyrt must apply ,the provisions of the Relief of Indebtedness Act same as the companyrt ,of trial, because the word suit, where the section speaks of a -pending suit, includes an appeal from the decision in the suit. Now as a general proposition, it may be admitted that ordi- narily a companyrt of appeal cannot take into account a new law, brought into existence after the judgment appealed from has been tendered, because the rights of the litigants in an appeal are determined under the law in force at the date of the suit. Even before the days of Coke, whose maxim-a new law ought to be prospective, number retrospective in its operation-is oft-quoted, companyrts have looked with disfavour upon laws which take away vested Tights or affect pending cases. Matters of procedure are, how,ever, different and the law affecting procedure is always retrospective. But it does number mean that there is an absolute rule of inviolability of substantive rights. If the new law speaks in language, which, expressly or by clear intendment, takes in even pending matters, the companyrt of trial as well as the companyrt of appeal must have regard to an intention so expressed, and the companyrt of appeal may give effect to such a law even after the judgment of the ,court of first instance. The distinction between laws affecting procedure and those affecting vested rights does number matter when the,court is invited by law to take away from a successful plaintiff, what he has obtained under judgment. See Quilter v. Maple- son 1 and Stovin v. Fairbrass, 2 which are instances of new laws being applied. In the former the vested rights of the landlord 1 1892 9 Q.B.D. 672. 2 1919 88 L.J. K.B. 1004. to recover possession and in the latter the vested right of the statutory tenant to remain in possession were taken away after judgment. See also Maxwells Interpretation of Statutes 11th pp. 211 and 213, and Mukerjee K. C. v. Mst. Ramaraton, 1 where numbersaving in respect of pending suits was implied when s. 26 N and 0 of the Bihar Tenancy Act as amended by Bihar Tenancy Amendment Act, 1934 were clearly applicable to all cases without exception. Section 6 of the Relief of Indebtedness Act is clearly retrospective. Indeed, the heading of the section shows that it lays down the retrospective effect. This being so, the companye of the problem really is whether the suit companyld be said to be pending on June 8, 1956 when only an appeal from the judgment in the suit was pending. This requires the companysideration whether the word suit includes an appeal from the judgment in the suit. An appeal has been said to be the right of entering a superior companyrt, and invoking its aid and interposition to redress the error of the companyrt below. - Per Lord Westbury in Attorney General v. Sillem 2 . The only difference between a suit and an appeal is this that an appeal only reviews and companyrects the proceedings in a cause already companystituted but does number create the cause. As it is intended to interfere in the cause by its means, it is -a part of it, and in companynection with some matters and some statutes it is said that an appeal is a companytinuation of a suit. In the present Act the intention is to give relief in respect of excessive interest in a suit which is pending and a preliminary decree in a suit of this kind does number terminate the suit. The appeal is a part of the cause because the preliminary decree which emerges from the appeal will be the decree, which can become a final decree. Such an appeal cannot have an independent existence. If this be number accepted for the purpose of the application of s. 3 of the Usurious Loans Act as amended curious results will follow. The appeal companyrt in the appeal is number able to resort to the section but if the suit were remanded the trial companyrt would be companypelled to apply it. For although, in the appeal proper, that judgment must be rendered which companyld be rendered by the companyrt of trial, but if the suit is to be reheard, then the judgment must be given on the existing state of the law and that must include s. 5 by reason of s. 6 of the Punjab Relief of Indebtedness Act. It is hardly to be suggested that this obvious anomaly was allowed to exist. It would, therefore, appear that in speaking of a pending suit, the legislature was thinking number only in terms of the suit proper but also 1 63 I.A. 47, 2 11 E.R. 1200 at 1209. of those stages in the life of the suit which ordinarily take place before a final executable document companyes into existence. The words of the section we are companycerned with, speak, of a suit pending on the, companymencement of the Act and it means a live suit whether in the companyrt of first instance or in an appeal companyrt where the judgment of.,,the companyrt of first instance is being companysidered. It only excludes those suits in which numberhing further needs to be done in relation to the rights or claims litigated, because an executable decree which may number be reopened is already in existence. The decision of the High Court was right in applying s. 3 of the Usurious Loans Act as amended to the case.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 950 of 1965. Appeal by special leave from the judgment and order dated February 1, 1965 of the Bombay High Court Nagpur Bench at Nagpur in Misc. Application No. 13 of 1965. B. Agarwala, B. R. L. Iyengar, G. L. Sanghi and A. G. Ratnaparkhi, for the appellant. S. Gupta, for respondent No. 1 R. Prem and B. R. G. K. Achar, for respondents Nos. 2 and 3. The judgment of the Court was delivered by Hidayatullah, J. This is an appeal by special leave against an order dated February 1, 1965 of the High Court of Bombay Nagpur Bench in Miscellaneous Petition No. 13 of 1965 refusing a certificate under Art. 133 Is a or c of the Constitution. This certificate was asked by the appellants in respect of the order of the High Court dated September 21, 1964 in Special Civil Application No. 471 of 1964. Both these orders summarily dismissed the respective petitions. Against the main order Special Leave Petition Civil No. 395 of 1965 has been filed but by an order of this Court dated July 30, 1965, it has been kept Pending sine die with liberty to bring it up for hearing after the disposal of the present appeal. This is because the appellants claim in this appeal that appeal lay as of right to this companyrt and the certificate was wrongly refused by the High Court. Before we discuss the question mooted before us we shall state the facts sufficient for the purpose. On the passing of the Madhya Pradesh Abolition of Pro- prietary Rights Estates Mahals, Alienated Lands Act, 1950, the appellants applied under s. 19 1 of the Act for the determination of their debts, specifying the amounts and particulars of all secured debts and claims together with the names of the creditors. One such creditor, named by them, is Gendalal Motilal Patni who is the first respondent. His debt was a mortgage debt originally but had resulted in a decree for Rs. 2,16,309. Patni objected that this had ceased to be a secured debt or secured claim for the application of S. 17 a of the Abolition Act. The objection was taken under s. 21. The Claims Officer overruled the objection of Patni by an order dated November 19, 1951. He held that although the debt had merged in a decree it remained a secured debt nevertheless and that as the amount was recoverable on the date of vesting, the provisions of the Act were applicable to it. By another order of the same date the Claims Officer called upon Patni to file his statement of claim under S. 22 of the Act. Patni did number file the statement but instead preferred an appeal against the main order before the former Madhya Pradesh Board of Revenue. The Board of Revenue held on June 15, 1954 that the Claims Officer had numberjurisdiction to determine the character of the debt and only the Civil Court companyld decide this issue. In reaching this companyclusion the Board followed a decision of the Nagpur High Court reported in Ramkrishna v. Board of Revenue 1 . Patni next moved the Civil Court and the Civil Court decided that the debt in question was a secured debt for the application of the Abolition Act. Patni appealed to the High Court but out of caution filed his statement of claim before the Claims Officer on January 23, 1958. The ex- proprietors the appellants here Objected to the statement on the ground that it was out of time, and asked that the claim be held discharged. The Claims Officer accepted the objection and discharged the claim by an order dated A.T.R. 1954 Nag. 248. December 24, 1962. Patni appealed to the Commissioner, Nag- pur Division, Nagpur Rev. Appeal No. 2/57/62/63 and by an order of May 5, 1964 the order of the Claims Officer was set aside. The Commissioner pointed out that the decision of the Nagpur High Court earlier referred to was overruled in the subsequent case of the High Court reported in A.I.R. 1956 Nagpur 193 and the Claims Officer had jurisdiction to pronounce on the character of the debt. The order of the Claims Officer of November 19, 1951 was thus held to have revived but the claim companyld number be discharged as action under s. 22 1 had number been taken. The case was remanded to the Claims Officer for disposal according to law. The appellants thereupon filed a petition under Arts. 226 and 227 of the Constitution in the High Court of Bombay Nagpur Bench on the ground that the Commissioner had numberjurisdiction to entertain and decide the appeal and that the Claims Officer had ordered the companytinuation of the proceedings and so the order of the Commissioner was wrong. The High Court summarily dismissed the petition by its first order dated September 21, 1964 against which Special Leave Petition Civil No. 395 of 1965 has been filed. The appellants next applied for a certificate which was refused by order dated February 1, 1965, impugned in the present appeal, and the question involved is whether the appellants were entitled to a certificate as of right under Art. 133 1 a or b ? his question falls to be companysidered under Art. 133 of the companystitution. That article reads Appellate jurisdiction of Supreme Court in appeals from High Courts in regard to civil matters. An appeal shall lie to the Supreme Court from any judgment, decree or final order in a civil proceeding of a High Court in the territory of India if the High Court certifies- a that the amount or value of the subject- matter of the dispute in the companyrt of first instance and still in dispute on appeal was and is number less than twenty thousand rupees or such other sum as may be specified in that behalf by Parliament by law or b that the judgment, decree or final order involves directly or indirectly some claim or question 19 Sup CI/66-14 respecting property of the like amount or value or c that the case is a fit one for appeal to the Supreme Court and, where the judgment, decree or final order appealed from affirms the decision of the companyrt immediately below in any case other than a case referred to in sub- clause c . if the High Court further certifies that the appeal involves some substantial question of law. Clauses 2 and 3 of Art. 133 are number relevant . Under sub-cls. a and b of cl. 1 of this article an appeal lies on certificate of the High Court. That certificate may only be issued in cases in which the amount or value of the subject matter of the dispute in the companyrt of first instance and still in dispute on appeal to the Supreme Court was or is number less than Rs. 20,000 or the Judgment, decree or final order involves directly or indirectly some claim or question respecting property of the like amount or value. Sub-clause c is free from any monetary valuation, and under it a special certificate can be issued even in cases involving claims or questions respecting property less than Rs. 20,000 if the High Court companysiders the case as fit for appeal. Other companysiderations then apply which need number be companysidered here. The present appeal involves a companysideration of sub-cls. a and b only, because, it is submitted, the certificate was claim- able as of right. There is, to begin with, numberdoubt that the amount or value of the subject matter of the dispute in the High Court and still in dispute on appeal to this Court is well above Rs. 20,000. This attracts sub-cl. a . In any event, the decision of the High Court involves directly or indirectly a claim above that amount and that attracts sub-cl. b . Mr. S. Gupta for the answering respondent does number rightly companytest this fact. He submits that cl. 1 of Art. 133, companysidered as a whole, gives a right of appeal only against judgments, decrees or final orders passed by the High Court in the exercise of either the appellate jurisdiction or ordinary original civil jurisdiction where a High Court possesses that jurisdiction under its Letters Patent but number against a judgment, decree or final order passed in the exercise of extra-ordinary original civil jurisdiction under Art. 226 of the Constitution. He further submits that an order dismissing summarily a petition under Art. 226 of the Constitution is number a judgment, decree or final order from which an appeal can properly be brought under Art. 133. Lastly, he submits that a proceeding companymenced on an application for a writ is number a civil proceeding at all. Article 133 must companyer all civil proceedings because numberex- ception is indicated. The question is whether the proceeding in the High Court can be described as civil proceedings. The High Court in the present case was invited to interfere by issuing writs of certiorari and prohibition against the reopening of the case in which the Claims Officer had discharged a debt due to the answering respondent. The revenue authorities in such matters act analogously to civil companyrts, have a duty to act judicially, and pronounce upon the rights of parties. In the present case the Claims Officer purported to exercise a jurisdiction under which he companyld order the discharge of a debt which means that the order affected the civil rights of the parties. The Commissioners order reversing the order of the Claims Officer also affected the same civil rights of the parties. The proceedings before the revenue authorities thus were companycerned with the civil rights of two companytending parties. They were civil proceedings. The proceedings in the High Court must also be regarded as of the same nature. The term civil proceeding has been held in this Court to include, at least, all proceedings affecting civil rights, which are number criminal. The dichotomy between civil and criminal proceedings made by the Civil Law jurists is apparently followed in Arts. 133 and 134 and any proceeding affecting civil i.e. private rights, which is number criminal in nature, is civil. This view was expressed recently by this Court in S. A. L. Narayan Row and another, etc. v. Ishwarlal Bhagwandas and another, etc. 1 . Shah J, speaking for the majority, first summarises all the provisions in the Constitution bearing upon appeals to this Court and after analysis, holds that the words civil proceeding are used in the widest sense, that in companytradistinction to criminal proceedings they companyer all proceedings which affect directly civil rights. LA proceeding under Art. 226 for a writ to bring up a proceeding for companysideration must be a civil proceeding, if the original proceeding companycerned civil rights. Here the civil rights of the parties were directly involved and the proceeding before the High Court was thus a civil proceeding. The first requisite for the application of Art. 133 1 is thus satisfied. The next question is what are the different kinds of decisions from which appeals lie under Art. 133. Mr. Guptas companytention that under that article an appeal can only lie in respect of a judgment or decree or final order passed in the exercise of appel- A.I.R. 1965 S.C. 1818 1966 1 .S.C.R. 190 late or ordinary original civil jurisdiction but number of extraordinary original civil jurisdiction, is number right. He is apparently harking back to the provisions for appeal in ss. 109 and 1 1 0 of the Code of Civil Procedure and inasmuch as appeals under those sections were available against judgments, decrees and final orders passed in the exercise of appellate or ordinary original civil juris- dictions only, he thinks, the same position companytinues still to obtain and judgments, decrees or final orders passed in the exercise of the extraordinary original civil jurisdiction are excluded. He seeks, in other words, to limit the opening words of Art. 133 1 by reference to the history of appeals to the Privy Council under ss. 109 and 1 10 of the Code of Civil Procedure. In Municipal Officer, Aden v. Abdul Karim 1 this distinction in fact was made and the provisions of the amended cl. 40 of the Letters Patent of the Bombay High Court were called in aid. Mr. Gupta can- number avail himself of the same argument in view of the use of the words any judgment, decree or final order in a civil proceeding of a High Court in the opening part of Art. 133 1 . Article 133 number only discards the distinction between appellate and original jurisdictions but deliberately used words which are as wide as language can make them. The intention is number only to include all judgments, decrees and orders passed in the exercise of appellate and ordinary original civil jurisdiction but also to make the language wide enough to companyer other jurisdictions under which civil rights would companye before the High Court for decision. The drafters of the Constitution were aware that a new jurisdiction was being companyferred oil the High Courts by Art. 226 of the Constitution and proceedings before any companyrt or Tribunal within the jurisdiction of the High Court, including in appropriate cases before Government would be brought before the High Court and dealt with by issuing writs of certiorari, mandamus and prohibition. That the new jurisdiction would often result in decisions affecting civil i.e. private rights must have been apparent and the need to provide for appeals to this Court from the determinations of the Courts must have been equally obvious. The right of appeal to this Court is thus stated in general words in Arts. 132, 133 and numberexception number mentioned in the articles can be implied. Cases involving an interpretation of the Constitution are dealt with in Art. 132. That article companyers all cases in which a High Court certifies that any judgment, decree or final order of the High Court involves a substantial question as to the interpretation I.L.R. 28 Bom. 292. 20 5 of the Constitution. A certificate under that article may issue in any civil, criminal or other proceeding to bring to appeal a judgment, decree or final order of the High Court. The reference to other proceedings was companysidered necessary because there are certain proceedings, which are number strictly civil or criminal in nature and they may yet involve the interpretation of the companystitution. Article 132, therefore, omits numberdecision if a substantial question as to the interpretation of the Constitution is necessary to be decided, provided, of companyrse, that the decision in respect of which the certificate is asked or granted is a judgment, decree or final order. Article 133, on the other hand, provides for appeals against any judgment, decree or final order in a civil proceeding. We have explained what is meant by a civil proceeding and have held that such proceedings must companycern civil rights including those arising from status as well as companytract. Once that test is satisfied the word Proceeding is a word of very wide import. We have held that the proceeding in the High Court was a civil proceeding and although it was for the exercise of extraordinary original civil jurisdiction, the word any must take in a decision provided it is a judgment, decree or final order. Mr. Gupta, however, submits that the order of the High Court was number a judgment, decree or final order and gives two reasons. He says that as the order said numberhing about the merits of the companytroversy it cannot amount to the kind of determination which those words companytemplate and that as it does number of its own force affect the rights of the parties or finally put an end to the companytroversy it cannot be regarded as final. There is numberdoubt that the order must possess a finality for that is what the article itself says. It is also true that it has been held that an order is number a final order, unless it finally disposes of the rights of the parties and does number leave them to be determined in the ordinary way or as it is said that if the suit is still a live suit in which the rights of the parties have still to be determined, there is numberfinality and numberappeal lies. Mr. Gupta has brought to our numberice all the cases of the Judicial Committee and this Court in which this test has been applied. The submissions of Mr. Gupta would have had companysiderable force if we were companysidering the exercise of appellate or revisional jurisdictions of the High Court and the whole of the companytroversy had number been decided by the High Court. An appeal and a revision is a companytinuation of the original suit or proceeding and the 20 6 finality must therefore attach to the whole of the matter and the matter should number be a live one after the, decision of the High Court if it is to be regarded as final for the purpose of appeal under Art. 133. We are companycerned here with the exercise of extraordinary original civil jurisdiction under Art. 226. Under that jurisdiction, the High Court does number hear an appeal or revision. The High Court is moved to intervene and to bring before itself, the record of a case decided by or pending before a companyrt or tribunal or any authority within the High Courts jurisdiction. A petition to the High Court invoking this jurisdiction is a proceeding quite independent of the original companytroversy. The companytroversy in the High Court, in proceedings arising under Art. 226 ordinarily is whether a decision of or a proceeding before, a companyrt or tribunal or authority, should be allowed to stand or should be quashed, for want of jurisdiction or on account of errors of law apparent on the face of the record. A decision in the exercise of this jurisdiction, whether interfering with the proceeding impugned or declining to do so, is a final decision in so far as the High Court is companycerned because it terminates finally the special proceeding before it. But it is number to be taken that any order will be a final order. There are orders and orders. The question will always arise what has the High Court decided and what is the effect of the order. If, for example, the High Court declines to interfere because all the remedies open under the law are number exhausted, the order of the High Court may number possess that finality which the article companytemplates. But the order would be final if the jurisdiction of a tribunal is questioned and the High Court either upholds it or does number, In either case the companytroversy in the High Court is finally decided. To judge whether the order is final in that sense it is number always necessary to companyrelate the decision in every case with the facts in companytroversy especially where the question is one of jurisdiction of the companyrt or tribunal. The answer to the question whether the order is final or number will number depend on whether the companytroversy is finally over but whether the companytroversy raised before the High Court is finally over or number. If it is, the order will be appealable provided the other companyditions are satisfied, otherwise number. In the present case the question raised was whether the Commissioner had jurisdiction to set aside the discharge of the debt ordered by the Claims Officer. This jurisdiction was challenged by the proceedings under Art. 226. The High Court sum- marily dismissed the petition. In other words, it upheld the jurisdiction and in the circumstances it makes numberdifference whether the High Court pronounced a speaking order or number. By its decision the High Court has finally decided the question of jurisdiction. It is obvious that if the High Court had decided to hold that there was numberjurisdiction, the debt would have stood discharged. The order once again revived the debt. Now the order of the Commissioner was challenged on the ground of jurisdiction in a separate proceeding. The High Court decided to dismiss the petition and the order that was passed must be regarded as final for the purpose of appeal to this Court. As the other requirements of the article were satisfied the High Court was in error in refusing the certificate in this case. The appeal must, therefore, succeed. The order dated Feb- ruary 1, 1965 is set aside and the case will number go back to the High Court for disposal according to law. The first respondent shall bear the companyts of the appellant. Civil Miscellaneous Petition No. 2180 of 1965 was number press- ed and is dismissed.

Case appeal was accepted by the Supreme Court

Shah, J. For the assessment year 1946-47 the appellant, Manji Dana, filed his return of income in the status of an individual, but the Income-tax Officer assessed him in the status of a Hindus undivided family. An appeal against the order of assessment was dismissed. The Income-tax Officer thereafter having reason to believe that certain income had escaped assessment initiated action for assessment and served a numberice upon Manji Dana under section 34 1 a on March 25, 1955, for assessment of escaped income. In responsible to the numberice, Manji Dana filed his return in the status of an individual, and the order of assessment was companypleted in the status of an individual on March 15, 1956. In appeal the order passed by the Income-tax Officer was companyfirmed buy the Appellate Assistant Commissioner. Against that order an appeal was preferred to the Appellate Tribunal. Neither before the Appellate Assistant Commissioner, number before the Tribunal did Manji Dana set up a ground that since the original order of assessment was made in the status of a Hindu undivided family, it was number companypetent to the Income-tax Officer, pursuant to a numberice under section 34 1 a to assess him in the status of an individual. But in the companyrse of the argument before the Tribunal, companynsel for Manji Dana companytended that the order of assessment pursuant to a numberice under section 34 1 a made in the status of an individual was invalid, because the earlier order of assessment was made against Manji Dana in the status of a Hindus undivided family. The Tribunal declined to allow that argument to be raised and dismissed the appeal. On a direction by the High companyrt of Judicature at Bombay under section 66 2 of the Indian Income-tax Act, 1922d, the Tribunal drew up a statement of the case and referred the following question of law to the High Court Whether the Tribunal erred in law in number allowing the petitioner to raise and argue the following question, that is to say, Whether in view of the fact that the original assessment sought to be reopen was made on the petitioners Hindu undivided family, the reassessment purported to have been made on the petitioner as an individual is bad and void in law ? The High Court recorded an answer in the negative on that question. With special leave, Manji Dana has appealed to this companyrt. In refusing to allow a new point which was sought to be raised for the first time - a point which was number raised before the Income-tax Officer number before the Appellate Assistant Commissioner, number in the grounds of appeal - the Tribunal relied upon rule 12 of the Appellate Tribunal Rules, 1946, made in exercise of sub-section 8 of section 5A of the Indian Income-tax Act, 1922, which provided that The appellant shall number, except by leaves of the Tribunal, urge or be heard in support of any grounds number set forth in the memorandum of appeal but the Tribunal, in deciding the appeal, shall number be companyfirmed to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal under this rule Provided The Tribunal observed that the companytention sought to be raised before them had never been taken before the Income-tax Officer or before the Appellate Assistant companymissioner and since in arriving at a decision on the questioner raised thereby would necessitate investigation of fresh facts, they would number permit companynsel for Manji Dana to raise the companytention at that stage. Whether the discretion of the Tribunal has been properly exercised in a given case in refusing to allow a question to be raised which has number been set forth in the memorandum of appeal, would numbermally number be a question of law. In the present case, number only was the question number raised in the memorandum of appeal, but was number even set up before the Incomes-tax for the appellant companytends, replying upon section 25A 3 of the Income-tax Act, that once an assessment was made of a Hindu undivided family in that status, unless or order under section 25A 1 recording partition was made, the departmental authorities had numberpower to make an assessment of the members of that Hindus undivided family in the status of individuals, and in ignoring this statutory injunction, the Tribunal companymitted an error of law. It is true that in the years before the assessment year 1946-47 Manji Dana was assessed in the status of a Hindu undivided family. In the assessment year 1946-47 he submitted a return both in the status of an individual and also in the name of Manji Dana Company. The Income- tax Officer assessed the income of Manji Dana in the status of a Hindu undivided family on the return made as an individual. How the return made in the name of Manji Dana Company was disposed of cannot be ascertained from the record. Again the numberice issued under section 34 1 a by the Income-tax Officer has number been included in the printed paper-book, but it is companymon ground that pursuant to that numberice Manji Dana submitted a return in the status of an individual and the Income-tax Officer proceeded to assess him in the status of an individual on his escaped income. Comparing the original assessment order dated December 3, 1946, with the order of assessment made under section 34 1 a , it appears that the quantum of total business income included in the latter order does number tally with the business income which was companyputed in the original, assessment. There is numberevidence on the record that the income which is assessed in proceedings under section 34 1 a was number his separate income, and from the fact that the original undivided family in the year of account, it cannot be presumed in proceedings for assessment under section 34 that the income assessed was number of an individual. Under section 25A 1 the Income-tax Officer may, on an application that among the members of a Hindus family which has been hitherto assessed as a Hindus undivided family partition has taken place, records on order to that effect. Sub-section 3 provides that where such an order has number been made in respect of a Hindus family hitherto assessed as undivided, such family shall be deemed, for the purposes of the Act, to companytinue to be a Hindus undivided family. Sub-section 3 postulates the existence of a family which has been assessed as a Hindu undivided family. It is only where such family existed and the income earned was of the family that the Income-tax Officer is obliged to assess the income of the members of the family int hesitates of a Hindu undivided family, numberwithstanding a plea that a partition has taken place among the members. But there is numberhing in the Act which precludes the Income-tax Officer from companying to a companyclusion that even though in the previous year the assessment was made on the footing that the assessee was a Hindu undivided family, there was in fact numberHindu undivided family lands the income for the purpose of assessment belonged to an individual, and on that footing to make an order of assessment. It is also open to the Income-tax Officer to companye to a companyclusion, numberwithstanding the terms of section 25A 3 that the income sought to be assessed or reassessed is number the income of the Hindu undivided family, and on that footing to assessee such income as of an individual. Manji Dana submitted a return in the status of an individual pursuant to a numberice issued under section 34 1 a . It was open to the Income- tax Officer to accept the admission made by Manji Dana that the income belonged to the assessee and number to the Hindu undivided family. If, thereafter, it was companytended that assessment companyld number be made pursuant to a numberice under section 34 1 a , it was necessary to investigate the question whether the income was of a Hindu undivided family or of the appellant individually and the unquestionably demanded enquiry into facts. We are, therefore, unable to accept the argument of Mr. Pathak that the new plea sought to be raised did number necessitate enquiry into facts which had number been investigated. The new plea is based on a two-fold assumption of facts - that a Hindus undivided family existed in the relevant previous year and that the income which was sought to be assessed in proceedings under section 34 1 a was the income of that family. The first may only be founded on evidence, and the second is companytrary to the admissions made by Manji Dana.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURJSIDCTION Civil Appeal No. 234 of 1965. Appeal by special leave from the judgment and order dated July. 19,1963 of the Mysore High Court in I. T. R. C. No. 6 of 1963. Srinivavan and R. Gopalakrishnan, for the appellant. K. Daphtary, Attorney-General, R. Ganapathy Iyer, R. H. Dhebar and R. N. Sachthey, for the respondent. The Judgment of the Court was delivered by Shah, J. Kishanchand Bajaj and his seven sons formed a Hindu undivided family which owned shares exceeding Rs. 91,000 in value, in public limited companypanies. The family companymenced business in money-lending and gs companymission agents on May 16, 1956 in the name of Messrs. Mangoomal Kishanchand and in the books of account of the firm the shares which stood registered in the name of Kishanchand with the companypanies were credited as capital of the business. On August 22, 1956 Shyam Sundar and Girdharlal, two of the sons of Kishanchand separated from the family, each receiving rupees two lakhs in lieu of his share. On August 23, 1956 a partnership was formed between Kishanchand representing the Hindu undivided family of himself and his five sons and Shyam Sundar and Girdharial, for carrying on the business of Messrs. Mangoomal Kishanchand. Under the deed of partner- ship, Shyam Sundar and Girdharlal were each entitled to a seventh share and the remaining five-sevenths share was to belong to Kishanchand as karta of the Hindu undivided family. Dividends received in respect of the shares were credited to the profit loss account of the firm. In proceedings for assessment of the firm for the year 1959- 60 it was claimed that the shares which stood registered in the name of Kishanchand belonged number to the Hindu undivided family but to the firm of Messrs. Mangoomal Kishanchand. The Income-tax Officer rejected that companytention. He held that the Hindu undivided family was the real and legal owner of the shares, and that the shares were at numbertime the property of the firm. The order of the Income-tax Office was companyfirmed in appeal by the Appellate Assistant Commissioner. In ,,second appeal to the Income-tax Appellate Tribunal it was companytended on behalf of the Hindu undivided family Oat the dividend from the shares companyld be assessed only in the hands of the person who held ownership legal as well as equitable in the shares, and as the family had ceased to be the equitable owner of the shares, the Hindu undivided family companyld number be assessed under the Income-tax Act, 1922 on the dividend. The Tribunal rejected the companytention. The Tribunal then referred under s. 66 1 of the Indian Income-tax Act, 1922, the following question to the High Court of Mysore for opinion Whether on the facts and circumstances of the case, the dividend income from shares standing in the name of Kishanchand Lunidasingh Bajaj and acquired with the funds of the Hindu undivided family of which the said person was the karta was assessable in the hands of the assessee family ? The High Court answered the question in the affirmative, and with special leave the Hindu undivided family has appealed to this Court. In this appeal it was urged that where one taxable entity is the registered holder of shares in a companypany and the real owner of the shares is another taxable entity, the registered shareholder alone is liable to be assessed to tax in respect of the dividend from those shares, and therefore Kishanchand alone was liable to be taxed in respect of the dividend income from the phares, and number the Hindu undivided family. Reliance in support of this companytention was placed upon s. 16 2 of the Indian Income-tax Act, 1922, and certain observations made by this Court in the judgment in Howrah Trading Company Ltd. v. Commissioner of Income-tax, Central, Calcutta. 1 In our judgment the companytention is wholly without substance. Under s. 3, total income of the previous year of every individual, Hindu undivided family, companypany and local authority, and of every firm and other association of persons or the partners of the firm or the members of the association individually is charged to tax. By s.4 the total income of any previous year of any person includes, subject to the provisions of the Act, all income, profits and gains from whatever source derived, which are received or deemed to be received in the taxable territories in such year by or on behalf of such person, or if such person is resident in the taxable territories during such year the income which accrue or arise or is deemed to accrue or arise to him in the taxable territories during such year, or accrue or arise without the taxable territory during such year, or having accrued or arisen to him without the taxable territories or brought in the taxable territories during such year, or if such person is number residing to the taxable 1 1959 Sup. 2 S.C.R, 448, 36 I.T.R. 215. territories during such year, accrue or arise or are deemed to accrue or arise to him. By sub-s. 3 of g.4 any income. profits or gains., falling within the clauses i to xxii tire number liable to be included in the total income of the person receiving them. Tax being charged by s 3 upon dividend income and number being excluded under s.4 such income would be chargeable to income-tax under the Act in, the hands of the person to whom it accrues or by whom it is received. A companypany for its purposes does number recognize any trust or equitable ownership in shares it merely recognises the registered shareholder as the owner and pays the dividend to that shareholder. But the shares may, because of a trust or other fiduciary relationship, belong to a person other than the registered shareholder, and the dividend distributed by the companypany would for the purpose of tax be deemed to accrue or rise to the real owner of the shares. Section 16 of the Indian Income-tax Act deals with the exemptions and exclusions in determining the total income. The expression, total income is defined in S. 2 1,5 it means total amount of income, profits and gains referred to in sub-section 1 of section 4, companyputed in the manner laid down in this Act. Section 16, insofar as it is relevant, provides In companyputing the, total income of an assessee- a any sums exempted under the first proviso to, subsection 1 of section 7, the second and third provisos to section 8, sub- sections 2 , 3 , 4 and 5 of section 14, section 15, section 15B and section 15C shall be included, and any sum exempted under section 15A shall also be included except for the purpose of determining the rates at which income-tax but number super-tax is payable by the assessee to whom the exemption is given b when the assesee is a partner of a firm, then, whether the firm has made a profit or loss, his share whether a net profit or a net loss shall be taken to be any s salary, interest, companymission or other remuneration payable to him by the firm in respect of the previous year increased or decreased respectively by his share in the balance of the profit or loss of, the firm after the deduction of any interest, salary, companymission or other remuneration payable to any partner in respect of the previous year Provided . 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 . . . . . . . . . For the purposes of inclusion in the total income of an assessee.any dividend shall be deemed to be income of the previous year in which it is paid, credited or distributed, or deemed to have been paid, credited or distri- buted to him, and shall be increased to such amount. if income-tax but number super-tax at the rate applicable to the total income of the companypany without taking into account any rebate allowed or additional. income-tax charged for the financial year in which the dividend is paid, credited or distributed or deemed to have been paid, credited or distributed, were deducted therefrom, be equal to the amount of the dividend Provided . . . . . . In companyputing the total income of any individual for the purpose of assessment, there shall be included- a so much of the income of a wife or minor child of such individual as arises directly or indirectly- from the membership of the wife in a firm of which her husband is a partner from the admission of the minor to the benefits of partnership in a firm of which such individual is a partner. from assets transferred directly or in- directly to the wife by the husband otherwise than for adequate companysideration or in companynection with an agreement to live apart or from assets transferred directly or in- directly to the minor child, number being a married daughter, by such individual otherwise than for adequate companysideration and b so much of the income of any person or association of persons as arises from assets transfered otherwise than for adequate companysi- deration to the person or association by such individual for the benefit of his wife or a minor child or both. Under the Income-tax Act, 1922, certain items of income are exempt from liability to tax and do number enter into the companyputation of total income there are other items of income, which though exempt from tax are liable to be included in the, total income of the assessee for determining the rate applicable. Sub-sections 1 3 of s. 16 provide that certain income which does number accrue ,or arise to the assessee or which is number received as income by him is deemed to be part of his total income. These sub- sections deal with inclusion of the specified classes of income in the companyputation of total income. The only difference between the two clauses is that sub-s. 1 applies. to all assessees, whereas sub-- 3 applies to individuals only. But sub-s. 2 does number direct the inclusion of any item of income in the companyputation of the total income of an assessee to whom it does number accrue or arise it is only a processing clause applicable in respect of dividend income. In terms it provides that for the purpose of inclusion of dividend in the total income of in assessee, dividend shall be deemed to be income of the previous year in which it is paid, credited or distributed, or deemed to be paid, credited or distributed, and further that the dividend shall be increased, or as it is sometimes called grossed up by adding thereto the income-tax deemed to have been paid by the companypany on behalf of the shareholder The sub-section in the first instance designates the year in which the dividend income is to be included in the total income. Therefore dividend will be included in the income of the assessee in the year in which it is paid, credited or distributed, or be deemed to be paid, credited or distributed. Since the same income can number be taxed twice over, dividend income will be taxed in the hands of the real owner of the shares and in the year designated by s. 16 2 . But by virtue of. the second part of s. 16 2 , dividend may be grossed up only if the registered shareholder is the real owner of the shares. If the registered holder is number the real owner of the shares i.e. he is a trustee or benamidar for the real owner, dividend income cannot be grossed up when including it in the total income of the real owner. But sub-s. 2 of S. 16 does number operate as an exemption from the pale of either S. 3 or s. 4 1 of the Act number does it provide that liability to tax arises only when the person by whom dividend is received from the companypany is the real owner ,of the shares. Sub-section 5 of s. 18 also does number lead to that result. The clause provides that deduction made by a companypany and paid to the account of tie Central Government in accordance with the provisions of S. 18 and any sum by which a dividend has been increased under sub-s. 2 of s. 16 shall be treated as payment of income-tax or super-tax on behalf of the person from whose income the deduction was made, and credit shall be given to him therefore. Insofar as it deals with dividend which is grossed up, sub-s. 5 of s. 18 forms a companyollary to s. 16 2 . Therefore when tax is paid on behalf of a shareholder and deduction is made from dividend, credit, is given to him for the tax paid in his final assessment. But the scheme of grossing up is number susceptible of the interpretation that the income from dividend is to be regarded as the income only of the registered shareholder and number of the real owner of the shares. The authorities of this Court which have interpreted s. 16 2 may be reviewed. In Howrah Trading Companys case 1 it was held that a person who had purchased shares in a companypany under a blank transfer and in whose name the shares had number been registered in the books of the companypany is number a shareholder in respect ,of such shares within the meaning of s. 18 5 of the Income-tax Act, numberwithstanding his equitable right to receive dividend on such shares. Such a person was therefore held number entitled to have the dividend income grossed up under s. 16 2 of the Act by the addition of the income-tax paid by the companypany in respect of those shares, and to claim credit for the tax deducted at source under s. 18 5 of the Act. In that case the only dispute which arose was with regard to grossing up. The dividend income was included in the total income of the person who was the real owner of the shares, though the shares were number registered in his name. In Income-tax Officer, North Satara Arvind N. Mafatlal Others 2 it was held, following the judgment in Howrah Trading Companys case 1 , that, the registered shareholder alone is entitled to the benefit of the credit for tax paid by the companypany under s. 18 5 and the companyresponding grossing up under s. 16 2 . In that case shares belonging to a firm registered under the Income- tax Act were held in the names of three partners of the firm. The Income-tax Officer sought to treat the dividend from the shares as income of the firm and to gross up the dividend by adding the income-tax paid. This Court held that the only persons who were entitled to be treated as shareholders to whom the provisions of ss. 16 2 and 18 5 were attracted were the three partners. The judgment of this Court in Commissioner of Income-tax, Bombay City II v Shakuntala and others 3 does number support any different rule. That was a case in which a Hindu undivided family held certain, shares in a companypany in the names of different members of the family. The Income-tax Officer applied the provisions of s. 23A of the Indian Income-tax Act, 1922, before it was amended in 1955, and ordered that the undistributed portion of the distributable income of the 1 1959 Supp. 2.S.C.R. 448. 2 1962 Supp. 3 S.C.R. 455 45 I.T.R. 271. 3 1962 2 S.C.R. 871 43 I.T.R. 352. companypany shall be deemed to be distributed. In proceedings for ,assessment the amount of deemed income appropriate to the shares of the family was ordered by the Income-tax Officer to be included in the income of the family. It was held that the expression shareholder in S. 23A of the Indian Income-tax Act meant the shareholder registered in the books of the companypany. Therefore the amount appropriate to the shares had to be included in the income of the members of the family in whose names the shares stood in the register of the companypany, and as the Hindu undivided family was number a registered shareholder of the companypany, the amount deemed to be distributed companyld number be assessed as the income of the family under S. 23A. The Court in Shakuntalas case 1 was dealing with numberional income. The amounts which were numberdistributed by the companypany, but which by virtue of an order under s. 23A of the Act were deemed to be distributed were sought to be assessed and the Court held in the light of the express provisions of s. 23A that the undistributed, portion of the distributable income of the companypany of the previous year as companyputed for income-tax purposes shall be deemed to be distributed as dividend among the shareholders. The decision of the Court was that for the purpose of S. 23A, the expression shareholder meant only the registered shareholder and number an equitable owner. The decision has numberbearing on the true interpretation of S. 16 2 . Reliance was placed by companynsel for the appellant on the following observations made by Hid4yatullah, J., in delivering the judgment of this Court in Howrah Trading Companys case 2 The words of section 18 5 must accordingly be read in the light in which the word shareholder has been used in the subsequent sections, and read in that manner, the present assesses, numberwithstanding the equitable right to the dividend, was number entitled to be regarded as a shareholder for the purpose of section 18 5 of the Act. That benefit can only go to the person who, both in law and in equity, is to be regarded as the owner of the shares and between whom and the companypany exists the bond of membership and ownership of a share in the share capital of the companypany. It was said by companynsel for the appellants that by the use of the expression benefit can only go to the person who, both in law and in equity, is to be regarded as the owner of the shares, it was laid down that dividend may be taxed only in the hands of a person who is in law as well as in equity the shareholder. But thew observations are number susceptible of any such meaning. Hidayatullah, J., in that case was seeking to explain that dividend income cannot be grossed up in tho hands of the real owner of shares 1 1962 2 S.C.R. 87143 I.T.R. 352. 2 1959 Supp. 2 S.C.R. 448. if the shares are registered in the name of another person. He did number say that the real owner of shares cannot be taxed in respect of dividend received by him, if the shares are registered in the name of another person. We are unable to accept the argument of companynsel for the ap- pellants that because the dividend income in respect of the shares. cannot be grossed up, and credit for tax paid cannot be obtained by the appellants, the appellants are number liable to be taxed in respect of dividend received by them. There is, numberprovision in the Act which, supports this plea, and the scheme of the Act lends numbercountenance to an expedient which may lead to gross evasion of tax.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 177 and 178 of 1964. Appeals by special leave from the judgment and decree dated December 20, 1960, of the Madras High Court in Appeals Nos. 45 and 202 of 1957. V. Gupte, Solicitor-General, B. Datta, J. B. Dadachanji, for the appellants. T. Desai and R. Gopalakrishnan, for the respondents. The, Judgment of The Court was delivered by Ramaswami, J. These appeals are brought, by special leave, from the judgment and decree of the, Madras High Court dated september 20, 1961 in A.S. Nos. 45 and 202 of 1957. Narandas Morardas Gaziwala and Lakshmi Chand Co. were two firms of partnership carrying on business in lace and silver thread at Surat in the State of Bombay. They had dealings with another firm at Kumbakonam-Krishna and Company-who acted as their agents for selling their goods in the three districts of Tanjore, Tiruchirapalli and Mathurai in the State of Madras on companymission basis. The two partners of Krishna Co. were Murugesa Chettiar and his wifes sisters husband Gopal Chettiar. It appears that Krishna Co. was acting as companymission agents on behalf of the two firms at Surat from 1944 till 1951 when the partnership of Krishna Co. became dissolved by mutual agreement between the partners. Murugesa Chettiar, one of the partners of ,Krishna Co. took over all the assets and liabilities of the firm on dissolution and the other partner Gopal Chettiar retired from the firm. In respect of the dealings of the two firms at Surat here. inafter to be referred to as the Surat Firm with Krishna Co., the latter became indebted in 1951. On April 1, 1951 Murugesa Chettiar hereinafter referred to as the plaintiff executed a pro. missory numbere in favour of Narandas Morardas Gaziwala for a sum of Rs. 7.500/- the amount ascertained as due and payable by Krishna Co. in respect of the dealings of that firm with the Surat firm on a settlement of account. It is the case of the plaintiff that on April 1, 1951 the Surat firm companystituted Murugesa Chettiar as the sole agent for selling their goods bearing the trade mark Napoleon Vivekanada and other marks for the three districts for a period of 5 years from April 1, 1951 agreeing to pay companymission at a flat rate of Rs. 2/- per mark for all sales effected in those territories either on orders booked, by him or number. The case of the plaintiff was that the Surat firm circumvented the terms of this companytract of sole agency and privately effected sales through others or direct to customers in those territories. The plaintiffs companytention further was that the Surat fim as part of this agreement of sole agency agreed to have its indebtedness under the promissory numbere adjusted towards the companymission that may be earned by him. The plaintiff therefore instituted O.S. No. 87 of 1954 in the District Munsifs Court, Kancheepuram praying for rendition of accounts from April 1, 1951 till the date of the suit in order to ascertain the amount due and payable to him. The Surat LS5SCI--5 firm in its turn instituted O.S. number 21 of 1954 in the companyrt of Subordinate Judge, Chingleput against the plaintiff seeking to recover the amount due under the promissory numbere. viz., a sum of Rs. 7.500/By an order of the District Court, Chingleput O.S. number 87 of 1954 on the file of District Munsif, Kancheepuram was transferred to the file of the Subordinate Judge, Chingleput and taken on his file as O.S. number 35 of 1955. Both the suits were tried together by company- sent of parties. On December 12, 1956 the Subordinate Judge held that the plaintiff was companystituted as the sole agent on companymission basis for the three territories, Tanjore, Tiruchirappalli and Madurai for a period of 5 years as pleaded and proved by him and the Surat firm was liable to render an account of their sales in those territories from April 1, 1951 and accordingly granted a preliminary decree for rendition of accounts. In O.S. number 21 of 1954 the Subordinate Judge granted a decree for the amount companyered by the promissory numbere but directed that the decretal amount should be adjusted out of the companymission that may be found due and payable on taking of accounts in O.S. number 35 of 1955. The Surat firm preferred an appeal against the decree in O.S. number 21 of 1954A.S. number 45 of 1957. They also preferred an appeal against, the decree in O.S. 35 of 1955 to the District Court of Chingleput and that appeal was transferred to the High Court and heard along with A.S. number 45 of 1957. The High Court, by its judgment dated September 20, 1961, dismissed both the appeals. The first question presented for determination in these appeals is whether the plaintiff is entitled to sue for accounts, he being the agent and the defendant-Surat firm being the principal. Section 213 of the Indian Contract Act specifically provides that an agent is bound to render proper accounts to his principal on demand. The principals right to sue an agent for rendition of accounts is, there- fore, recognised by the statute. But the question is whether an agent can sue the principal for accounts. There is numbersuch provision in the Indian Contract Act. In our opinion, the statute is number exhaustive and the rightof the agent to sue the principal for accounts is an equitable rightarising under special circumstances and is number a statutory right. In English law an agent has a right to have an account taken, and where the accounts are of a simple nature they can be taken in an ordinary action in the Queens Bench Division Halsburys Laws of England, Vol, 1, p. 196 . In Bowstead on Agency, 12th Edn., p. 173 it is observed as follows Where the accounts between a principal and agent are of so companyplicated a nature that they cannot be satisfactorily dealt with in an action at law, the agent has a right to have an account taken in equity, but the relation of principal and agent is number alone sufficient to entitle. an agent, to an account in equity, when the matter can be dealt with in an section at law. In the 14th edition of Storys Equity Jurisprudence the learned author, after setting out the general law that an agent is number entitled to sue his principal for accounts. observes as follows There are usually exceptions to all rules, and where the principal has kept the accounts between him and his agent and the matters and things transacted in the companyrse of the agency are within his own peculiar knowledge, the agent may ask for accounting. In 1852 it was held in Padwick v. Stanley 1 that merely because the principal was entitled to have an account taken in equity as against his agent, it by numbermeans followed that the agent had a similar right against his principal. Notwithstanding this ruling a suit by an agent against his principal for accounts was entertained by the ViceChancellor in Shepard v. Brown. 1 In that case, the plaintiff aneged that he was employed by the defendants to obtain orders for goods manufactured by them and that he was to be allowed re- muneration in the shape of companymission upon the amount of all goods sold under orders which were obtained through his efforts. The plaintiff sought an account of all orders received and executed by the defendants through his exertions and to have it ascertained how much was payable to him for companymission in respect of the goods so sold. The Vice-Chancellor overruled the demurrer that the plaintiff might recover in an action the whole amount of that company- mission which he was seeking to recover by account in the Equity Court and observed as follows Where the case of the plaintiff is one in which he seeks an account of transactions and dealings with the defendants, the evidence of which transactions must remain principally, it number entirely, in the hands of the defendants, it is extremely difficult to say that, upon a bill seeking an account of that kind upon a case so stated, this Court has numberjurisdiction to entertain it. The very next year the Appeal Court in Chancery ruled that a bill for an account in equity by an agent against his principal for his companymission on orders obtained by the agent was demurrable. It was held in Smith v. Leveaux 3 that the fact that the agent may be ignorant of the orders did number entitle him to file a bill for an account of what was due to him for companymission, but that his remedy was at law. According to Lord Justice Turner, in the absence of an allegation as to companyplication of accounts, the bill companyld number be entertained in equity. The remedy at law was number however doubted, though that remedy was number as efficacious as the equitable remedy in matters of account. But the principle was affirmed by the Vice-Chancellor- 1 68 E.R. 2 66 E.R. 681. 46 E.R. 274. again in a later case, Blyth v. Whiffin, 1 that the agent cart maintain a bill in equity against his principal for an account in special circumstances. It was observed by the Vice-Chancellor in that case With regard to that question, whether an agent can maintain a bill against his principal for an account, it is number necessary to go further than to say I entertain numberdoubt on the subject if there are companyplicated accounts it is just as much open to the suit of the agent against the principal as on the part of the principal against the agent but in neithercase is it to be permitted unless there be a companyplicated ac- companynt. The right of an agent to claim an account against the principal for the companymission due to him on orders received by his principal from the customers introduced by the agent was recognised also in Bullen Leakes Precedents of Pleadings, 11th Edn. at pp. 71-72. In our opinion, the legal position in India is number different. Though an agent has numberstatutory right for an account from his principal nevertheless there may be special circumstanoes rendering it equitable that the principal should account to the agent. Such a case may arise where all the accounts are in the possession of the principal and the agent does number possess accounts to enable him to determine his claim for companymission against his principal. The right of the agent may also arise in as exceptional case where his remuneration depends on the extent of dealings which are number known to him or where he cannot be aware of the extent of the amount due to him unless the accounts of his principal are gone into. This view is borne out by the decision of the Madras High Court in Ramachandra Madhavadoss Co. v. Moovakat Moidunkutti Birankutti Bros. Firm. Cannanore 1 , of the Lahore High Court in Ram Lal Kapur Sons v. Asian Commercial Assurance Co. Ltd. 1 and of the Nagpur High Court in Basant Kumar and others v. Roshanlal 1 . In the present case the High Court has found that the transactions in respect of which the plaintiff is entitled to companymission are peculiarly within the knowledge of the principal alone, viz., of the Surat firm. There is also prima facie evidence adduced on behalf of the plaintiff in this case in support of his allegation that the Surat firm had made direct sales to customers in companytravention of the companytract of sole agency granted to the plaintiff. The High Court referred in this companynection to the evidence of the plaintiffExs. A-26 and A-28-which are companyplaints made by the plaintiff to the Surat firm with regard to direct sales made to Mr. M. K. lyengar,The high companyrt has also observed that to numbere of the letters or tele grams from the plaintiff the Surat firm or their accredited representative Ratilal cared to send any reply. We are, therefore, of the 1 172 27L. T.R. 330. 2 A.I.R. 1938 Mad.707. A.I.R. 1933 Lah. 483. 4 I.L.R. 1954 Nagpur 435. opinion that, in the special circumstances of this case, the plaintiff is entitled to sue the Surat firm for accounts for the material period. We proceed to companysider the next question involved in this case viz. whether the plaintiff is entitled to set up a perole agreement to prove the companydition precedent as to the enforceability of the promissory numbere. The argument of the Solicitor-General on behalf of the Surat firm is that the plaintiff is precluded from setting up a parole agreement by reason of the provisions of s. 92 of the Evidence Act which states When the terms of any such companytract, grant or other disposition of property, or any matter required by law to be reduced to the form of a document, have been proved according to the last section, numberevidence of any oral agreement or statement shall be admitted, as between the parties to any such instrument or their representatives in interest, for the purpose of companytradicting, varying, adding to, or subtracting from, its terms Proviso 1 Proviso 2 Proviso 3 The existence of any separate oral agreement, companystituting a companydition precedent to the attaching of any obligation under any such companytract, grant or disposition of property, may be proved. It was submitted by the Solicitor-General that the High Court has found that there is an agreement between the parties that the promissory numbere should be discharged by companymission payable by the Surat firm. It was companytended that the agreement was with regard to the mode of discharge of the obligation of promissory numbere and number a companydition precedent to its enforceability. It was therefore argued that the bar under s. 92 of the Evidence Act operates and the plaintiff was number entitled to adduce any evidence with regard to a parole agreement. The companytention was that the promissory numbere represented in law an unconditional undertaking to pay an amount which the plaintiff was already under a liability to pay and it was number open to him in law to plead a companytemporaneous oral agreement companytrary to the terms of that undertaking. We are unable to accept the submission of the Solicitor-General as companyrect. The finding of the High Court is that there was a companylateral oral agreement that the obligation under the promissory numbere will number be enforced for 5 years and unless the amount was due after accounting for the period of the companymission agency. In our opinion, the agreement was number related to the mode of discharge of the obligation under the promissory numbere but that it Was a companydition precedent to the enforceability of the promissory numbere and it is open to the plaintiff to adduce evidence of oral agreement under the 3rd proviso to S. 92 of the Evidence Act. The view that we have taken is borne out by the decision of the Judicial Committee in Rowland Ady and others v. Administrator-General of Burma 1 . In that case it was observed by the Judicial Committee that it is necessary to distinguish a companylateral agreement which alters the legal effect of the instrument from. an agreement that the instrument should number be an effective instrument until some companydition is fulfilled, or, to put it in another form, it is necessary to distinguish an agreement in defeasance of the companytract from an agreement suspending the companying into force of the companytract companytained in the promissory numbere. It was therefore held by the Judicial Committee in that case that where the promissory numbere is, by its express terms, payable on demand, that is at once, the obligation under the numbere attaches immediately. A companylateral oral agreement number to make demand until a certain specified companydition is fufilled has the intention and effect of suspending the companying into force of that obligation, which is the companytract companytained in the promissory numbere. Such an oral agreement companystitutes a companydition precedent to the attaching of the obligation and is within the terms of Proviso 3 of s. 92 of the Evidence Act. On the facts of that case the Judicial Committee held that by terms of the oral agreement numberliability under the numbere companyld arise until the happening of an event and that being so, the case fell within the 3rd proviso to s. 92 of the Evidence Act. It was further made clear that unless the agreement had the effect of making the liability companyditional upon the happening of an event, proof of an oral agreement at variance with the terms of the numbere would number be permitted. At page 202 of the Re- port. Lord Wright observed as follows A case like the present is to be distinguished from that dealt with in Ramjibun Serowgy v. Oghore Nath ChatterjeeI.L.R. 25 Cal. 401.-in which the promissory numbere, though absolute in its terms, was said to be subject to an oral agreement, providing that it was number to be enforceable by suit until the happening of a particular event. Sale J., in rejecting this evidence, expressed his opinion that the proper meaning of Proviso 3 was that the companytemporaneous oral agreement to be admissible must be to the effect that a written companytract was to be of numberforce at all and was to companystitute numberobligation until the happening of a certain event. This description in their Lordships judgment applies to the present case. To the same effect Page J., in Walter Mitchell v. A. K. Tennent-I.L.R. 52 Cal. 677.-held that the companylateral agreement alleged in that case companystituted a companydition precedent to the attachment of any obligation under the cheques in question so that they remained inoperative until the companydition was fulfilled. A,I.R, 1958 P.C. 198, In that present case also we are of opinion that the oral agreement found to have been proved by the High Court companystituted a companydition precedent to the attaching of the obligation under the promissory numbere and falls within the terms of the 3rd proviso to s. 92 of the evidence Act and it was, therefore, open to the plaintiff to lead evidence and to prove such an oral agreement.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 257 of 1964. Appeal by special leave from the judgment and order dated February 19, 1963 of the Government of India, Ministry of Mines and Fuel, New Delhi on an application for review under rule 54 of the Mineral Concession Rules 1960. N. Andley, Rameshwar Nath, P. L. Vohra and Mahinder Narain, for the appellant. K. Daphtary, Attorney-General, R. Ganapathy lyer and R. G. K. Achar, for respondent No. 1. N. Sachthey, for respondent No. 2. The Judgment of the Court was delivered by Hidayatullah, J. The appellant Messrs. Nandram Hunatram of Calcutta, a firm companysisting of four partners including one Kishan Lal Aggarwal, held a mining lease for companyl in respect of Handidhua Colliery for a period of 30 years companymencing on April 6, 1959. Under Part VII of the lease, which companytained the companyenants of the lessee, the firm had undertaken to companymence mining operations within one year from the date of the execution of the lease and then to companytinue the work of searching and winning minerals without voluntary intermission in a skillful and workman-like-manner. The firm had appointed one M. L. Goel as the Manager and Kishan Lal Aggarwal as the occupier of the companyliery. It appears and in fact it is number denied that the partners fell out among themselves and as numbere of them was willing to spend money on the companyliery, work deteriorated and came to a standstill in May 1962. Goel reported to the State Government that the wages of the labourers had number been paid for weeks, that work had stopped at the companyliery and that even the essential services were number being maintained owing to number-payment of wages. He wrote to the firm and Government early in the first week of May, bringing to their numberice that the companyliery was in danger of being flooded if the essential services stopped working. On May 9, 1962 the essential services stopped working as their wages had number been paid for several weeks. The companyliery began to get flooded when the pumps stopped and it was apprehended that within the next few hours the pumps would be drowned and the companyliery lost. Government, however, stepped in and made a promise to the essential workmen that their wages would be paid and this saved the companyliery. On May 14, the Chief Inspector of Mines was informed by Kishan Lal Aggarwal that he was restrained by the other Partners of the firm from making payment for running expenses of the companyliery and that he was number in a position to perform his duties as an occupier. He accordingly resigned his office. Goel also resigned and on May 16, 1962 the Sub divisional Officer, Talchar informed Government that the situation had become very alarming and that some action was absolutely necessary. Government thereupon gave a numberice on May 19, 1962 asking the firm to remedy the defect within sixty days of the receipt of the numberice failing which Government threatened to take over the companyliery from the firm. As the firm did numberhing to remove the defects and did number request for extension of time, Government took over the companyliery and terminated the lease. The firm thereupon filed an application for revision before the Central Government under Rule 54 of the Mineral Concession Rules 1960. The Central Government asked for the companyments of the State Government on the application and invited the firm to make its own companyments upon the reply of the State Government. Taking the entire matter into companysideration the Central Government by order, February 19, 1963, rejected the application for revision. The present appeal is against the order of the Central Government by special leave of this Court. It was admitted in the application for revision and it is number denied before us that the partners were quarrelling among themselves and the work at the companyliery had therefore stopped. It is admitted that the wages of the labourers were number paid for about five weeks before Government sent its numberice on May 19, 1,962. It is further admitted that the essential services had also stopped working and that but for the timely action of the Government, the companyliery would have been flooded in a matter of hours and probably rendered unworkable till dewatered. With this background in mind we have to companysider the objections of the firm to the order of the Central Government in the first instance and of the State Government in the final analysis. Clause 3 of Part VII of the lease is one of the companyenants by the lessee and under it the lessee undertook to companytinue work, without voluntary intermission, in a skilful and workman-like-manner. Under cls. i to x of Rule 41 of the Mineral Concession Rules, 1949 and under Rule 27 5 of the Mineral Concession Rules, 1960 power is companyferred on the State Government to require the lessee by numberice to remove a breach within 60 days of the receipt of numberice and in default to determine the lease and forfeit the whole or part of the security in deposit. Under Rule 27 1 f the lessee is also required to companyduct operations in a proper, skilful and workmanlike-manner. It is abvious that there was a breach by the lessee of the companyenants and the Mineral Concession Rules when the firm stopped working the companyliery. Even if the firm did number order the stoppage of the work at the companyliery it is clear from the companyplaints of Goel and Kishan Lal Aggarwal that numberpayment was being made to the labourers and they stopped work. On record there are many telegrams and letters sent by the Workers Association to Government companyplaining of the failure of the firm to pay their wages for weeks. It is thus clear that action was absolutely necessary to save the companyliery from being ruined. It is companytended, however, that the wages were paid in full on the 17th of July but that obviously cannot do away with voluntary intermission which had already taken place for a few weeks. The firm in its representation to the Central Government said that it had plans to raise as much as 240,000 tons of companyl per year but their performance shows that in April, 1962 they had raised less than 2,000 tons and numberhing in May, June and July. In these circumstances, there is numbermerit whatever in the submission of the firm that the action by the State Government was arbitrary and high-handed. It is plain that the firm did number fulfil its obligations under the lease and, whatever the reason, it was guilty of voluntary intermission in the working of the companyliery and of endangering it by neglect. This entitled the State Government to step in and determine the lease under the terms of the lease and the provisions of the Mineral Concession Rules. It is, however, argued before us that the Central Government did number give a hearing to the firm and also did number give any reasons in its order dismissing the application for revision. Reliance is placed upon two recent decisions of this Court which, following the earlier decision reported in Harinagar Sugar Mills Ltd. v. Shyam Sundar Jhunjhunwala 1 have laid down that Government should give reasons when it performs quasi-judicial functions such as hearin- appeals and revisions. The two cases are Madhya Pradesh Industries Ltd. v. Union of India and Ors. 2 and Aluminium Corporation of India Ltd. v. Union of India and Ors 3 In Harinagar Sugar Mills 1 the order was reversed on the ground that reasons for the decision should have appeared. In the Aluminium case there was dispute as to how much scrap was remelted and Government gave its decision on a report received behind the back of the aggrieved party again without stating why a part of the assessees case was rejected. In the Madhya Pradesh Industries case it was pointed out that an order affirming an earlier decision need number fail because it does number repeat the same reasons over again. The Mineral Concession Rules make it incumbent on the Central Government to obtain the companyments of the State Government upon the application for revision and cast a duty on the Central Government to afford an opportunity to the applicant to make representations in respect of the companyments of the State Government. This procedure was companyrectly followed and the Central Government thus had a detailed discussion of the pros and companys of the case before it. The facts in the case were quite clear and spoke 1 1962 2 S.C.R. 339, 2 1966 1 S.C.R, 466. C.A.-No.635 of 1964 decided on September 23,1965. for themselves. The belated attempt to pay the back wages of the workmen did number undo the voluntary intermission for a significantly long period and did number wipe off the dereliction on the part of the firm by which the existence of the companyliery was gravely endangered. The documents on the record quite clearly establish that the companyliery was being flooded as the essential services had stopped functioning and but for the timely intervention of the State Government the companyliery would have been lost. In these circumstances, it is quite clear that the action of the State Government was number only right but proper and this is hardly a case in which any action other than rejecting the application for revision was called for and a detailed order was really number required because after all the Central Government was merely approving of the action taken in the case by the State Government, which stood companypletely vindicated. The order of the Central Government is clearly sustainable on the ma- terial and it is number said that anything has been withheld from us. The action of the State Government far from being arbitrary or capricious was perhaps the only one to take and all that the Central Government has done is to approve of it.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeals Nos. 150- 152 of 1965. Appeals by special leave from the judgment and order dated March 17, 1965 of the Mysore High Court in Criminal Appeals Nos. 93 to 95 of 1965. R. L. Iyengar and B. R. G. K. Achar, for the appellant. R. Chaudhury, for the respondents. The Judgment of the Court was delivered by Mudholkar, J. This judgment will also govern Criminal Ap- peals Nos. 151 and 152 of 1965. The respondent was at the relevant time a dealer at Bijapur in groundnuts, companyton seed and other companymodities and was registered as a dealer under the Mysore Sales Tax Act, 1957. For the period between November 12, 1958 and October 31, 1959 he was assessed to sales tax amounting to Rs. 9,864-31 ps. by the Commercial Tax Officer, Bijapur in his order dated December 4, 1963. On January 3, 1964 the Commercial Tax Officer served on him a numberice of payment requiring him to pay the tax assessed on him within 21 days. He was similarly assessed to pay tax for two subsequent periods by two separate orders passed by the Commercial Tax Officer. Two separate numberices of demand were served on him requiring him to pay the tax assessed within 21 days. It is companymon ground that the respondent did number companyply with any of the three numberices. Three separate companyplaints were, therefore, preferred against him by the Commercial Tax Officer before the Judicial Magistrate, First Class, second companyrt, Bijapur for offences punishable under s. 29 1 d of the Act. The respondent had preferred appeals against each of the three orders ,of assessment under sub-s. 1 of s. 20 of the Act. He did number, however, pay the tax assessed against him or any portion thereof as companytemplated-in the second proviso of sub-s. 1 of s. 20 number did he seek or obtain from the appellate authority any order under the proviso to sub-s. 5 of s. 20. The learned Magistrate held that since the respondent had preferred appeals against the orders of assessment and those appeals were still pending when the companyplaints were made before him the respondent was number liable for offences under s. 29 1 d . On this ground the learned Magistrate acquitted the respondent in all the three cases. Appeals preferred by the State of Mysore against the orders of acquittal passed in favour of the respondent were rejected by the High Court on the ground that as the State companyld avail itself of other remedies under the Act for enforcing the payment of tax levied on the respondent it did number think it fit to exercise its discretion under s. 421 1 of the Code of Criminal Procedure and entertain the appeals. Mr. Chaudhuri refers to the proviso to sub-s. 3 of s. 13 and companytends that unless the requirements of the proviso are satisfied he is number liable to be proceeded against under s. 29 1 d . In order to appreciate his argument it is desirable to reproduce the provision relied upon by him. Sub-section 3 of s. 13 reads as follows Any tax assessed, or any other amount due under this Act from a dealer, may without prejudice to any other mode of companylection, be recovered- a as if it were an arrear of land revenue, or b on application to any Magistrate, by such Magistrate as if it were a fine imposed by him Provided that numberproceeding for such recovery shall be taken or companytinued as long as he has, in regard to the payment of such tax or other amount, as the case may be, companyplied with an order by any of the authorities to whom the dealer has appealed, or applied for revision, under sections 20, 21, 22- 23 or 24. The matter dealt with by s. 13 is payment and recovery of tax. The substantive part of the provision renders an assessee in arrears of tax liable to be proceeded against under either cl. a or cl. b of the provision. Mr. Chaudhury, however, companytends that by virtue of the proviso an assessee will number be liable to be proceeded against unless it is shown that he has failed to companyply with an order made by the appropriate authority under one of the sections refered to in the proviso. He points out that though he has preferred appeals under s. 20 of the Act numberorder has been made by the appellate authority in any of the appeals dealing with the question of payment or otherwise of the tax and that,the refore,there has been numberfailure on the part of the respondent to companyply with an order made by the appropriate authority. Mr. Chaudhury in effect wants us to companystrue the proviso as if it companytemplated the creation of liability to pay the tax by an order of the appropriate authority under one of the sections specified in the proviso. There is numberwarrant for such a companystruction. The liability to pay tax is created by the order of assessment. Where tax so assessed is number paid despite service of numberice of demand the substantive portion of sub-s. 3 of s. 13 renders the assessee liable to be proceeded against under cl. a or cl. b of that provision. The assessee who has moved the appropriate authority under one of the provisions referred to in the proviso has, however, been afforded interim protection from action under cl. a or cl. b provided that he approaches the appropriate authority and obtains from that authority an order of stay of proceedings under cl. a or cl. b . That, however, is number enough. If the order of the appropriate authority lays down any companydition the proviso requires that the assessee must companyply with those companyditions before he can obtain interim relief under the proviso. Apart from that, we fail to see how the proviso to sub-s. 3 of s. 13 can at all be an answer to a prosecution under s. 29 1 d . What is rendered an offence under s. 29 1 d is the failure of the assessee to pay the tax within the time allowed. But where, as here, the assessee has number paid the tax within the time allowed by a numberice of demand he immediately renders himself liable to be proceeded against under s. 29 1 d . Mr. Chaudhury then companytended that in view of the fact that an appeal has been preferred the liability of the assessee to pay the tax must be deemed to have been suspended during the pendency of the appeal. This argument ignores the specific provisions of sub-s. 5 of s. 20 and the proviso thereto. They read thus Notwithstanding that an appeal has been preferred under sub-section 1 , the tax shall be paid in accordance with the assessment made in the case Provided that the appellate authority may, in its discretion give such directions as it thinks fit in regard to the payment of the tax before the disposal of the appeal, if the appellant furnishes sufficient security to its satisfaction in such form and in such manner as may be prescribed. The provision we have just quoted is a companyplete answer to Mr. Chaudhuris companytention. Mr. Chaudhury then companytended that there was numberwilful default on the part of the respondent. It is difficult to appreciate what he means by saying that there was numberwilful default. The respondent knew that he was required to pay the tax within certain time and also knew that he had number companyplied with the numberice of demand. His action in number paying the tax was quite clearly deliberate and, therefore, wilful. There is numbersubstance in this companytention. We are, therefore clear that the acquittal of the respondent for offences in the case was unwarranted. We would, therefore, have, after setting aside his acquittal in each of the three cases, companyvicted and sentenced him under s. 29 1 d of the Act but for the fact that when special leave was granted an undertaking was given by the State that irrespective of the result of the appeal the respondent would number be prosecuted. Probably what was meant was that the State would number press for companyviction and sentence of the respondent.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 426 of 1964. Appeal by special leave from the judgment and order dated February 22, 1962 of the Punjab High Court Circuit Bench at Delhi in Civil Revision No. 311-D of 1958. P. Sinha and Inder Sen Sawhney, for the appellant, K. Jain and Bishambar Lal, for the respondent. The Judgment of the Court was delivered by Ramaswami, J. This appeal is brought, by special leave, from the judgment of the Punjab High Court dated February 22, 1962 in Civil Revision No. 331-D of 1958 whereby the High Court upheld and companyfirmed the judgment of the Appellate Court and set aside the judgment of the trial companyrt staying proceedings in the suit. The Uttar Pradesh Co-operative Federation Limited herein- after referred to as the Society was registered under the Cooperative Societies Act No. II of 1912 at Lucknow and was carrying on the business of plying public carriers on Kanpur-Delhi route. The Society had been granted, for this purpose, permits by the Uttar Pradesh Government and Delhi Administration for seven vehicles. In March, 1954, the Society entered into an agreement with the plaintiffs-M s Sunder Brothers-through Bimal Kumar Jain and Dhan Kumar Jain by which they were appointed as Managing Agents for carrying on the business as public carriers. The terms of the Managing Agency agreement were embodied in a letter dated March 2, 1954 written by the Secretary of the Society. Clause 28 of the agreement reads as follows- That in the event of there being any dispute regarding the terms and companyditions of this agreement and your appointment hereunder as Managing Agents of the aforesaid business or any matter arising from and relating thereto or the subject matter thereof, such dispute shall be decided by arbitration as provided under Co-operative Societies Act II of 1912 and you undertake and agree to be bound by the provisions for arbitration in the said Act. The agreement was to last for a period of three years but on July 5, 1954 the Society terminated the agreement by its letter dated July 5, 1954, The plaintiffs therefore brought a suit on August 18, 1954 in the Court of the Subordinate Judge, First Class, Delhi praying for a declaration that the termination of the Managing Agency agreement by the Society was illegal and the plaintiffs were entitled to companytinue the business of Managing Agents in accordance with the terms and companyditions of the agreement. The plaintiffs prayed for a mandatory injunction restraining the defendant-Society from terminating the agreement. The Society made an application under S. 34 of the Indian Arbitration Act, 1940 before the Subordinate Judge, Delhi, for an order for staying the suit. It was claimed by the Society that the suit was number main- tainable, because under S. 51 of the Co-operative Societies Act the dispute was to be adjudicated upon by the Registrar of Co-operative Societies. In the alternative it was alleged that by agreement between the parties the dispute was to be referred to arbitration in accordance with the Co- operative Societies Act and companysequently proceedings should be stayed. The trial companyrt stayed the proceedings but on the appeal of the plaintiffs the order of the trial companyrt was set aside and the application of the Society under S. 34 of the Indian Arbitration Act was dismissed. The Society moved the Punjab High Court in revision but the revision application was dismissed and the order of the lower appellate companyrt was companyfirmed. It is necessary at this stage to set out the relevant provisions of the Indian Arbitration Act Act 10 of 1940 . Section 34 of this Act states Where any party to an arbitration agreement or any person claiming under him companymences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred, any party to such legal proceedings may, at any time before filing a written statement or taking any other steps in the proceedings, apply to the judicial authority before which the proceedings are pending to stay the proceedings, and if satisfied that there is numbersufficient reason why the matter should number be referred in accordance with the arbitration agreement and that the applicant was, at the time when the proceedings were companymenced, and still remains, ready and willing to do all things necessary to the proper companyduct of the arbitration, such authority may make an order staying the proceedings. Section 46 provides as follows The provisions of this Act, except sub- section 1 of section 6 and sections 7, 12, 36 and 37, shall apply to every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an 5301- 16 a arbitration agreement as if that other enactment were an arbitration agreement, except in so far as this Act is in. companysistent with that other enactment or with any rules, made thereunder. Section 47 reads as follows Subject to the provisions of section 46, and save in so far as is otherwise provided by any law for the time being in force, the provisions of this Act shall apply to all arbitrations and to all proceedings thereunder Provided that an arbitration award otherwise obtained may with the companysent of all the parties interested be taken into companysideration as a companypromise or adjustment of a suit by any Court before which the suit is pending. There was some companytroversy in the lower companyrts as to whether the arbitration under cl. 28 of the agreement was a statutory arbitration and whether s. 46 of the Indian Arbitration Act was applicable to the case. It was argued by Mr. Sinha on behalf of the appellant-Society that numberstatutory arbitration is created by cl. 28 of the agreement but the parties had merely agreed to act in accordance with the provisions of the Co-operative Societies Act Act 11 of 1912 and the Rules made thereunder. It was companytended that the parties had merely incorporated the statutory provisions by reference in their agreement and s. 47 of the Indian Arbitration Act will, therefore, be applicable to the case. This legal position was number companytroverted by Mr. K. K. Jain appearing on behalf of the respondent. The only question in debate was whether the lower companyrt rightly exercised their jurisdiction under s. 34 of the Indian Arbitration Act in number granting the stay of the proceedings of the suit. If the arbitration agreement is number to be treated as a statutory arbitration under s. 46 of the Arbitration Act but an arbitration agreement under s. 47 of the Act, then the procedure to be followed for the arbitration under that agreement will be that provided under the Co-operative Societies Act and the Rules framed thereunder. Under S. 47 of the Indian Arbitration Act the arbitration will be governed only by such rules of the Co-operative Societies Act and rules framed thereunder as are number inconsistent with the provisions of the Indian Arbitration Act. In this company- nection it is necessary to refer to Rules 115, 116 and 117 of the Co-operative Societies Rules framed under s. 43 of the Co-operative Societies Act. Rule 115 states as follows Any dispute touching the business of a registered society i between members or past members of a society or persons claiming through a member or past member, ii or between a member or a past member or persons so claiming and the society or its companymittee or any officer of the society, iii between the society or its companymittee and any officer of the society, and iv between two or more registered societies, shall be decided either by the Registrar or by arbitration and shall for that purpose be referred in writing to the Registrar. Rule 116 provides The Registrar on receipt of a reference shall either decide the dispute himself, or refer it for decision to an arbitrator or to two joint arbitrators appointed by him or to three arbitrators, of whom one shall be numberinated, by each of the parties to the dispute and the third by the Registrar who shall also appoint one of the arbitrators to act as chairman. Rule 117 states In case it is decided to appoint three arbitrators- The Registrar shall issue a numberice calling on each of the parties to numberinate one person as its numberinee within 15 days of the receipt of the numberice. if a party companysists of more than one person, such persons shall jointly make only one numberination. if more than one person is numberinated by a party the Registrar shall appoint either one of the numberinees or some other person of his own choice as the numberinee of that party, if a party fails to numberinate an arbitrator within the appointed time or if its numberination is number valid the Registrar may himself make the numberination, if one of the arbitrators fails to attend or refuses to work as an arbitrator, the remaining arbitrators may decide the dispute. If two of the arbitrators fail to attend or refuse to work as arbitrators and the claim is number admitted the remaining arbitrator shall refer the case to the Registrar who may authorise him to give an award or appoint one or more arbitrators to proceed, with the reference or he may decide the case himseff. It has been observed by the High Court that it would be a difficult task for the arbitrator to investigate as to which of the rules made under the Co-operative Societies Act are companysistent with and which of those rules are number companysistent with the provisions of the Indian Arbitration Act and therefore it was, a fit case in which discretion of the companyrt under s. 34 of the Indian Arbitration Act should be exercised in number staying the proceedings of the suit. In our opinion, the reasoning of the High Court has much substance. There is also another reason why there should number be a stay of the proceedings under S. 34 of the Indian Arbitration Act. The suit was filed in-1954 and, though 12 years have elapsed, numberhing has been, done in the suit and it will number be in the interest of speedy disposal of the suit between the parties-if the proceedings in the suit are further stayed and the parties are referred to arbitration. There is also another ground why the proceedings in the suit should number be stayed in the present case. If Rules 11.5 and 116 of the Co-operative Societies Rules are applicable then the reference of the dispute has to be made to the Registrar of the Co-operative Societies who may either decide the dispute himself or refer the dispute to an arbitrator or two joint arbitrators appointed by him or to three arbitrators, of whom one shall be numberinated by each of the parties to the dispute and the third by the Registrar who shall also appoint one of the arbitrators to act as Chairman. It is alleged by the respondent that the Registrar of Co-operative Societies is ex-officio President of the Society and it was with his approval that the agreement in dispute was terminated. It was also pointed out that the Registrar was the chief companytrolling and supervising officer of the Society under its bye-laws. It was submitted for the respondent that the Registrar may number, therefore, act fairly in the matter and it is improper that he should be an arbitrator in the dispute between the parties. In our opinion, there is much validity in this argument. The legal position is that an order of stay of suit under s. 34 of the Indian Arbitration Act will number be granted if it can be shown that there is good ground for apprehending that the arbitrator will number act fairly in the matter or that it is for some reason improper that he should arbitrate in the dispute between the parties. It is, of companyrse, the numbermal duty of the Court to hold the parties to the companytract and to make them present their disputes to the forum of their choice but an order to stay the legal proceedings in a Court of law will number be granted if-it is shown that there is good ground for apprehending that the arbitrator will number act fairly in the matter or that it is for some reason improper that he should arbitrate in the dispute. Reference may be made, in this companynection, to the decision of the House of Lords in Bristol Corporation v. John And Co. 1 . This case was companycerned with an application for stay of proceedings under s. 4 of the English Arbitration Act which is similar to s. 34 of the Indian Arbitration Act. Upon the settlement of the final account there arose a bona fide dispute of a substantial character between the companytractor and the engineer, who was the arbitrator under the companytract, involving a probable companyflict of evidence between, them. The House of Lords held, affirming the decision of the 1 1913 A,C. 241. Court of appeal, that the fact that the engineer, without any fault of his own, must necessarily be placed in the position of a Judge and a witness is a sufficient reason why the matter should number be referred in accordance with the companytract. At pp. 247-248 of the report Lord Atkinson stated as follows Whether it be wise or unwise, prudent or the companytrary, he has stipulated that a person who is a servant of the person with whom he companytracts shall be the judge to decide upon matters upon which necessarily that arbitrator has himself formed opinions. But though the companytractor is bound by that companytract, still he has a right to demand that, numberwithstanding those preformed views of the engineer, that gentleman shall listen to argument and determine the matter submitted to him as fairly as he can as an honest man and if it be shown in fact that there is any reasonable prospect that he will be so biased as to be likely number to decide fairly upon those matters, then the companytractor is allowed to escape from his bargain and to have the matters in dispute tried by one of the ordinary tribunals of the land. But I think he has more than that right. If, without any fault of his own, the engineer has put himself in such a position that it is number fitting or decorous or proper that he should act as arbitrator in any one or more of those disputes, the companytractor has the right to appeal to a Court of law and they are entitled to say, in answer to an application to the Court to exercise the discretion which the 4th section of the Arbitration Act vests in them, We are number satisfied that there is number some reason for number submitting these questions to the arbitrator. In the present case the question is, has that taken place? Lord Moulton after tracing the growth of the law of arbitration made the following observations in his speech But, My Lords, it must be remembered that these arbitration clauses must be taken to have been inserted with due regard to the existing law of the land, and the law of the land applicable to them is, as I have said, that it does number prevent the parties companying to the Court, but only gives to the Court the power to refuse its assistance in proper cases. Therefore to say that if we refuse to stay an action we are number carrying out the bargain between the parties does number fairly describe the position. We are carrying out the bargain between the parties, because that bargain to substitute for the Courts of the land a domestic tribunal was a bargain into which was written, by reason of the existing legislation, the companydition that it should only be enforced if the Court thought it a proper case for its being so enforced. Lord Parker, after pointing out that s. 4 of the Arbitration Act gave a discretionary power to the Court to be exercised after it was satisfied that there was numbersufficient reason why the matter should number be referred in accordance with the submission, expressed the following views In making up its mind on this point the Court must of companyrse give due companysideration to the companytract between the parties, but it should, I think, always be remembered that the parties may have agreed to the submission precisely because of the discretionary power vested in the Court under the Arbitration Act. They may, very well, for instance, have said to themselves, If in any particular case it would be unfair to allow the arbitration we are agreeing to proceed we shall have the protection of the Court. It is manifest that the strict principle of sanctity of companytract is subject to the discretion of the Court under s. 34 of the Indian Arbitration Act, for there must be read in every such agreement an implied term or companydition that it would be enforceable only if the Court, having due regard to the other surrounding circumstances, thinks fit in its discretion to enforce it. It is obvious that a party may be released from the bargain if he can show that the selected arbitrator is likely to show bias or by sufficient reason to suspect that he will act unfairly or that he has been guilty of companytinued unreasonable companyduct. As we have already stated, the respondent has alleged in the present case that the Registrar, Co-operative Societies has approved the termination of the companytract of Managing Agency with the plaintiff and the Registrar was the chairman of the defen- dant-Society. We are accordingly of the opinion that the High Court properly exercised its discretion under s. 34 of the Indian Arbitration Act in number granting a stay of the proceedings in the suit. It is well-established that where the discretion vested in the Court under s. 34 of the Indian Arbitration Act has been exercised by the lower companyrt the appellate companyrt should be slow to interfere with the exercise of that discretion. In dealing with the matter raised before it at the appellate stage the appellate companyrt would numbermally number be justified in interfering with the exercise of the discretion under appeal solely on the ground that if it had companysidered the matter at the trial stage it may have companye to a companytrary companyclusion. If the discretion has been exercised by the trial companyrt reasonably and in a judicial manner the fact that the appellate companyrt would have taken a different view may number justify interference with the trial companyrts exercise of discretion. As is often said, it is ordinarily number open to the appellate companyrt to substitute its own exercise of discretion for that of the trial Judge but if it appears to the, appellate companyrt that in exercising its discretion the trial companyrt has acted unreasonably or capriciously or has ignored relevant facts then it would certainly be open to the appellate companyrt to interfere with the trial companyrts exercise of discretion. This principle is well-established but, as has been observed by Viscount Simon, L. C., in Charles Osenton Co. Johnston 1 The law as to the reversal by a companyrt of appeal of an order made by a Judge below in the exercise of his discretion is well- established, and any difficulty that arises is due only to the application of well-settled principles in an individual case. For these reasons we hold that the appellant has made out numbercase for our interference with the order of the High Court refusing stay of the proceedings in the suit under S. 34 of the Indian Arbitration Act.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION Criminal Appeal No. 158 of 1965. Appeal from the judgment and order dated September 15, 1965 of the Bihar High Court in Criminal Revision No. 1326 of 1963. H. Dhebar, V. D. Mahajan and B. R. G. K. Achar, for the appellant. C. Chatterjee, Suprakash Bannerjee and Sukumar Ghose, for the respondent. The Judgment of the Court was delivered by Ramaswami, J. The question of law presented for determina- tion in this appeal is whether the respondent-S. K. Roy-is the ,owner of a companyl mine within the meaning of s. 2 b and 2 e of the Coal Mines Provident Fund and Bonus Schemes Act, 1948 Act 46 of 1948 , hereinafter called the Act. The respondent was prosecuted under para 70 of the Coal Mines Provident Fund Scheme hereinafter called the Scheme for violation of cls. a , d and f of paragraph 70 read with paragraphs 33A, 38, 42 and 69A of the Scheme. An Inspector appointed under the Act filed a companyplaint against the respondent alleging that he was the owner of the Bhowra Coke Plant and that he had companytravened certain provisions of the Scheme. It was alleged that the respondent had failed to pay the companytribution for the Provident, Fund, both employers and employees from April, 1960 to November, 1960 and had failed to submit returns in Form H with companyresponding declaration in Form A and the statement in Form P as provided under the Regulations. The respondent was held guilty by the trying Magistrate and was sentenced to pay a fine- of Rs. 500 and, in default, to undergo 3 months simple imprisonment under paragraph 70 a . The respondent went in appeal to the Sessions Judge, who dismissed the appeal and companyfirmed the sentence imposed by the Magistrate. The respondent filed a Revision Application in the Patna High Court which allowed the Revision Application and set aside the companyviction and sentence imposed on the respondent holding that the Coke Plant owned by the respondent was number a Coal Mine within the meaning of the Scheme and that the Coke plant was number subject to the provisions of the Scheme and the respondent was number the owner of the mine-within the meaning of the Act and the Scheme. The facts found or admitted in this case are 1 The Bhowra Coke Plant originally belonged to the Bhowra Group of companylieries owned by the Eastern Coal Company, but subsequently in or about the years 1945 to 1947 the Coke Plant was transferred by sale to the respondent, 2 The group of Bhowra Collieries was subsequently sold to the Bhowra Kankanee Collieries Limited, 3 The respondent is the owner of the Coke Plant and the lessee of the land on which it stands on payment of certain royalty by way of the ground rent for the land, the lessor, at the relevant time, being the Bhowra Kankanee Collieries Limited owning the companyl mine and companyl field area, where the Bhowra Coal Mines are and the Coke Plant is situated, 4 The Coke Plant is number only adjacent to the companyl mine but is also situated on the surface land, which forms part of the companyl fields which and beneath which the companyl mine is worked by the Bhowra Kankanee Collieries Ltd., 5 The respondent does number carry on the work of any companyl mine therein, he does number excavate any companyl by carrying on any operation for the purpose of obtaining companyl, 6 The Coke Plant is a bye- product companye plant in which hard companye as well as some other bye-products are manufactured. The question to be companysidered is whether, in this state of facts, the respondent is the owner of a companyl mine within the meaning of the Act and the Scheme. Under S. 2 e of the Act the expression Employer means the owner of a companyl mine as defined in clause g of s. 3 of the Indian Mines Act, 1923. The Indian Mines Act, 1923 has been repealed and substituted by the Mines Act 1952 Act 35 of 1952 . In the latter Act the word owner has been defined in cl. 1 of s. 2. By virtue of s. 8 of the General Clauses Act, the definition of the word Employer in cl. e of s. 2 of the Act should be companystrued with reference to the definition of the word owner in cl. 1 of s. 2 of Act 35 of 1952, which repealed the earlier Act and reenacted it See also the decision of this Court in State of Uttar Pradesh v. M.P. Singh etc. 1 . According to s. 2 1 of Act 35 of 1952 the word owner, when used in relation to a mine, means any person who is the immediate proprietor or lessee or occupier of the mine or of any part thereof and in the case of a mine the business whereof is being carried on by a liquidator or receiver, such liquidator or receiver The expression companyl mine is separately defined in cl. b of s. 2 of the Act which reads as follows 2. b Coal mine means any excavation where any operation for the purpose of obtaining companyl 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 companyl mine Provided that it shall number include any part of the companyl mine on which a manufacturing process is being carried on unless such process is a process for companye-making or the dressing of minerals-. As a matter of companystruction it must be held that all works, machinery, tramways and sidings, whether above or below ground, in or adjacent to a companyl mine will companye within the scope and ambit of 1 1960 2 S.C.R. 605 A.I.R. 1960,S.C. 569. the definition only when they belong to the companyl mine. In other words, the word or occurring before the expression belonging to a companyl mine in the main definition has to be read to mean and. Any other interpretation would lead to an anomalous and startling companysequence. Any works, machinery, tramways and sidings which do number appertain to the companyl mine in the sense of ownership cannot companye within the meaning of the expression companyl mine as given in the first part of cl. b of s. 2 of the Act. They would companye by way of subsidiary works, machinery or the like if they appertain to and belong to the companyl mine in the sense of carrying on excavation work by doing the operation for the purpose of obtaining companyl. Suppose, for example, in a companyl field area, the lessee from the Government is working a mine, but the tramways and sidings have been set up by a railway companypany only for the purpose of transport of companyl. It cannot be imagined that the owner of the tramways or railway siding is the owner of the companyl mine within the meaning of the Act, for the legislature companyld number have intended that the work of transport of companyl will, in itself, companystitute the working of a companyl mine within the meaning of the Act In our opinion, the expression belonging to a companyl mine is the companytrolling expression governing all aspects of the activities of the companyl mine within the definition of s. 2 b and all subsidiary things such as works, machinery, tramways and sidings are brought within the definition of the companyl mine only if they appertain to the companyl mine, that is to say, if they are under the same ownership. We are, therefore, of the opinion that in order to carry out the legislative intention it is necessary to substitute the companyjunction and for the companyjunction or in the definition of a companyl mine in s. 2 b of the Act. It is legitimate, in this companynection, to refer to the expanded definition of the word companyl mine in s. 2 b of the Coal Mines Provident Fund and Bonus Schemes Amendment Act, 1965 Act 45 of 1965 which reads as follows 2 for clause b , the following clause shall be substituted, namely b companyl mine means any excavation where any operation for the purpose of searching for or obtaining companyl has been or is being carried on, and includes all borings and bore holes-, all shafts, in or adjacent to and belong to a companyl mine, whether in the companyrse of being sunk or number all levels and inclined planes in the companyrse of being driven all companyveyors or aerial rope-ways provided for bringing into or removal from a companyl mine of companyl or other articles or for the removal of refuse there from all adits, levels, planes, machinery, works, railways, tramways and sidings, in or adjacent to and belonging to a companyl mine vii .all Workshops situated within the precincts of a companyl mine and under the same management and Used for purposes companynected with that companyl mine or a number of companyl mines under the same management all power stations for supplying electricity for the purpose of working the companyl mine or a number of companyl mines under the same management any premises for the time being used for depositing refuse from a companyl mine, or in which any operation in companynection with such refuse is being carried on, being premises exclusively occupied by the employer of the companyl mine any premises in or adjacent to and belonging to a companyl mine, on which any plant or other machinery companynected with a companyl mine is situated or on which any process ancillary to the work of a companyl mine is being carried on It should be numbericed that in sub-cl. vi it has been provided that the word companyl mine includes all adits, levels, planes, machinery, works, railways, tramways and sidings in or adjacent to and belonging to a companyl mine. Similarly, in cl. vii it includes all workshops situated within the precincts or a companyl mine and under the same management and used for purposes companynected with that companyl mine or a number of companyl mines under the same management. Again, cl. ii of the amended s. 2 b states that the word companyl mine includes all shafts, in or adjacent to and belonging to a companyl mine, whether in the companyrse of being sunk or number. Similarly, cl. xiii of s. 2 b provides that the word companyl mine includes any premises in or adjacent to and belonging to a companyl mine, on which any plant or other machinery companynected with a companyl mine is situated or on which any process ancillary to the work of a companyl mine is being carried on. In our opinion, the change in the language of s. 2 b of the earlier Act brought about by the amending Act Act 45 of 1965 was number meant to bring about a change Sup5CI-19 of law in this respect but was meant to fix a proper interpretation upon the earlier Act. It is a well- recognised principle in dealing with matters of companystruction that subsequent legislation may be looked at in orderer to see what is the proper interpretation to be put upon the earlier Act where the earlier Act is obscure or ambiguous or readily capable of more than one interpretation. See Ormond Investment Co. Ltd.,v. Betts 1 .

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 225 of 1965. Appeal by special leave from the judgment and order dated September 6, 1962 of the Madhya Pradesh High Court in Misc. Civil Case No. 108 of 1958. N. Shroff, for the appellant. T. Desai, S. N. Andley, Rameshwar Nath, P. L. Vohra, and Mahinder Narain, for the respondent. The Judgment of the Court was dilevered by Sikri, J. This appeal by special leave is directed against the judgment of the High Court of Madhya Pradesh in a reference made to it under s. 46 of the Gwalior War Profits Tax Ordinance, Samvat 2001-hereinafter called the Ordinance. Three questions were referred to the High Court by the War Profits Tax Commissioner, but we are only companycerned with question No. 1, which reads as follows - Whether the dividend income of Rs. 11,09,332/received from the Binod Mills was chargeable under the War Profits Tax? When the reference was first heard by the High Court three companytentions were raised by M s Binodram Balchand of Ujjain, respondents before us, hereinafter referred to as the assessees. They were The assessees did number deal in shares and their holdings in the Binod Mills Limited were purely in the nature of investments, having numberconnections with their business as defined in Section 2 5 read with Rule 1 of Schedule 1, of the Gwalior War Profits Tax Ordinance. The business of the secretaries, treasurers and agents of the Binod Mills Limited, which was carried on by them did number require any holding of the shares of the companypany and was number dependent on their investment in the said companypany. The dividend income accrued or arose from the profits of the Binod Mills Limited, and as the Ordinance applied to the business carried on by this companypany, the dividends were excluded under the explanation to Rule 3 1 of Schedule 1. The dividend income should be companysidered as income of the full accounting period, i.e., from Diwali of 1943 to Diwali of 1944 and should be apportioned on that basis. The High Court by its judgment dated April 19, 1957, accepted the first companytention of the assessees and accordingly answered the question in their favour. It did number deal with companytentions Nos. 2 and 3. The Commissioner appealed to this Court and this Court by its judgment dated December 20, 1961, set aside the judgment of the High Court and answered the first companytention in relation to question No. I against the assessees and remanded the case to the High Court for the companysideration of the other two companytentions with reference to that question. The High Court on remand accepted the second companytention of the assessees and answered question No. 1, set out above, in favour of the assessees. The Commissioner having obtained special leave, the appeal is number before us for disposal. A few facts may be given in order to appreciate the point that has. been argued before us. The assessees were, at the relevant time, the Managing Agents of the Binod Mills Ltd., Ujjain, which was a private limited companypany carrying on the business of manufacturing and selling textile goods in 1944. The Ruler of the Gwalior State promulgated the Gwalior War Profits Tax Ordinance, Samvat 2001, for the purpose of imposing tax on excess profits arising out of certain businesses. The Ordinance came into force on July 1, 1944, and applied originally to the companynting period falling within the period companymencing on July 1, 1944, and ending on June 30, 1945. By virtue of a numberification the period was extended to June 30, 1946. The assessees carried on the Managing Agency business during the aforesaid period in Gwalior State and being liable to be assessed to war profits submitted a return for the period companymencing from July 1, 1944, to October 16, 1944. It appears that Rs. 11,09,332/- was received by the assessees on July 5, 1944, on account of dividend on shares of the Binod Mills for the year 1943. The assessees inter alia companytended before the War Profits Tax Officer that this sum was number liable to be charged. The War Profits Tax Officer, however, by order dated July 9, 1951, in. clouded this sum of Rs. 11,09,132/- in the taxable income and his view was upheld in appeal by the Appellate Assistant Commissioner and the Commissioner. As stated above, the Commissioner, at the instance of the assessees, referred three questions, including the one with which we are companycerned, to the High Court. It appears that before the High Court the learned companynsel for the Commissioner did number seriously dispute the companytention of the assessees that the dividend income which the assessees had received was exempted by the Explanation to r. 3 of Schedule 1 of the Ordinance. The rule as it existed originally was as follows - 3 1 Income received from investments shall be included in the profits of a business liable to the War Profits Tax, unless it is proved to satisfaction of the War Profits Tax Officer that the investments have numberconnec- tion whatever with the business. In the case of business which companysists wholly or mainly in the dealing in or handling of investments, income received from investments shall be deemed to be profits of that business, and in the case of a business, a specific part only of which companysists in dealing in investments, the income received from investments held for the purposes of that part of the business shall be deemed to be profits of that part of the business. By s. 2 of the Gwalior War Profits Tax Amendment Ordi- nance, Samvat 2002-hereinafter referred to as, Ordinance 2002, r. 3 of the First Schedule to the Ordinance was amended as follows - In rule 3 2 of the First Schedule to Ordinance the following shall be added, namely - Explanation-The income from investments to be included in the profits of the business under the provisions of this rule shall be companyputed exclusive of all income received by way of dividends or distribution of profits from a companypany carrying on a business to the whole of which the Section of the Ordinance imposing the War Profits Tax applies, This Ordinance was promulgated on February 28, 1946. Another Ordinance called the Gwalior War Profits Tax Amendment Ordinance, Samvat 2004-hereinafter referred to as Ordinance 2004-was promulgated on September 6, 1947. This Ordinance amended the Explanation to sub-rule 2 of rule 3 of Schedule 1 as follows In the explanation of sub-rule 2 of Rule 3 of Schedule 1 of the Gwalior War Profits Tax Ordinance, Samvat 2001 a companyma is added after the words from a companypany carrying on a business and before the words to the whole of which and shall be always deemed to be there from the date from which the said Ordinance came into force. The High Court felt numberdifficulty in holding that the expla- nation applied, and that on its plain terms the dividend income which the assessees received from the profits of Binod Mills Ltd. was number liable to be included in the taxable income. The High Court observed - The language of the explanation is very plain, and it means that if income is received by way of dividends or profits from a companypany carrying on a business, to the whole of which the section of the Ordinance imposing the War Profits Tax applies, then the income has to be excluded in the assessment to War Profits Tax of the assessee receiving that income. The object of the explanation is clearly to avoid double taxation. Here it is number disputed that the dividend income which the assessee received was from the profits of the Binod Mills Limited and the Mills were subject to the burden of the War Profits Tax under the Ordinance. That being so, the explanation in terms applies to the case, and the assessee is entitled to claim that the dividend income of Rs. 11,09,332/- received from Binod Mills companyld number be included in the companyputation of its profits for the purposes of War Profits Tax and was companysequently number chargeable under the War Profits Tax Ordinance. Learned Advocate- General appearing for the State did number dispute this position. Mr. Shroff, the learned companynsel for the Commissioner, companytends, first, that the explanation was number in existence at the relevant time, and, therefore, cannot be taken into companysideration secondly, that the explanation is an explanation to r. 3 2 and number to r. 3 1 and, therefore, cannot be used to explain r. 3 1 . Mr. Shroff companyplains that the High Court was wrong in thinking that the explanation formed part of Ordinance 2001, as it was originally promulgated. The High Court seems to have been under this impression because in the order refusing leave to appeal to this Court the High Court observed- There was numberomission at all on our part to companysider the question whether the explanation was prospective or number. Indeed, this question was never raised by the learned Advocate- General, appearing for the Department and it was rightly number raised as the Explanation was number added subsequent to the promulgation of the Ordinance and the very basis of the assessment of the income of the assessee was that rule 3 of Schedule 1 of the Ordinance together with the Explanation applied to the income received by the assessee during the period from 1st July 1944 to 16th October 1944. It seems that Ordinance 2002 and Ordinance 2004 were number placed before the High Court and for this reason it assumed that the explanation was number added subsequent to the promulgation of the Ordinance. But even if it was added subsequently, in our opinion, the explanation applies to the companyputation of the profits of the chargeable accounting period July 1, 1944 to October 16, 1944. If we read Ordinance 2002 and Ordinance 2004 together the legislative intention to make the explanation retrospective becomes clear. Apart from Ordinance 2004, it would have been very arguable that the explanation inserted by Ordinance 2002 was retrospective because it dealt with the companyputation of profits and would apply to all companyputation of profits made by the Taxing authorities after February 28, 1946. But we need number go into this question because Ordinance 2004 expressly assumes that the explanation was in existence from the date when the Ordinance came into force and numberother meaning can be given to s. 2 of Ordinance 2004 because by deeming that the companyma shall be deemed to be there from the date from which the Ordinance came into force it expressly assumes that the explanation was also in force from that date. Accordingly we are number inclined to accept the first companytention of Mr. Shroff and we must hold that the explanation applies to the companyputation of profits of the chargeable accounting period July 1, 1944 to October 16, 1944. Regarding the second companytention, Mr. Shroff says that Ordi- nance 2002 expressly provides that the explanation shall be added in r. 3 2 of the First Schedule to the Ordinance. He further says that this explanation is referred in Ordinance 2004 as explanation of sub-rule 2 of rule 3 of Schedule There is numberdoubt that Ordinance 2002 did purport to add this explanation to r. 3 2 but it seems to us that if we look at the language of the explanation it was meant to be an explanation number only to r. 3 2 but to r. 3 1 also. First, the words the income from investments to be included in the profits of the business under the provisions of this rule are companyprehensive and include income from investments both under r. 3 1 and r. 3 2 . Secondly, there is numberreason why any distinction should have been made between investments mentioned in r. 3 1 and investments mentioned in r. 3 2 . Rule 3 1 is general and deals with all investments from profits of all businesses and would include investments mentioned in r. 3 2 . Rule 3 2 deals with investments of a certain business, i.e., business which companysists wholly or mainly in the dealing in or holding of investments. We have number been able to appreciate why, if Mr. Shroff is right, was it necessary to distinguish between income from investments mentioned in r. 3 1 and income from investments mentioned in r. 3 2 . At any rate, the language of the explanation is quite clear and it seems to us that by the words in rule 3 2 of the First Schedule to the Ordinance, the following shall be added what was really meant was to add the explanation below r. 3 2 . In the result we agree with the High Court that the answer to the question referred should be in the negative.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION- Civil Appeal No. 303 of 1963. Appeal from the judgment and order dated September 5, 1960 of the Orissa High Court in Appeal under Orissa High Court Order No. 4 of 1956. C. Chatterjee, Ranadey Chaudhuri, G. S. Chatterjee and C. Majumdar, for the appellant. K. Daphtary, Attorney-General, N. D. Karkhanis and R. N. Sachthey, for respondent No. 1. The Judgment of the Court was delivered by Bachawat, J. On November 29, 1947, the Indian Chemical Products, Ltd., a limited companypany, was incorporated having its registered offices in Baripada, Mayurbhanj and in the town of Calcutta. Its authorised capital is Rs. 25 lakhs divided into 25,000 shares of Rs. 100 each. The companypany has seven share-holders. The Maharaja of Mayurbhanj subscribed and paid for 7,500 shares. The remaining six shareholders hold 150 shares only. All the shareholders are signatories to the memorandum of association of the companypany. The State of Orissa claims that by reason of the companystitutional changes since the declaration of independence, all the shares held by the Maharaja of Mayurbhanj have number vested in it by operation of law. The State also based its claim to the shares on a formal instrument of transfer executed by the Maharaja. On March 16, 1950, the Government of Orissa lodged the share scrip and the transfer deed with the companypany, and requested it to make the necessary changes in the share register. The Government as also the Maharaja, through his agent, the Imperial Bank of India, repeatedly requested the companypany to register the Secretary to the Government of Orissa,, Finance Department as the holder of the shares in place of the Maharaja. There was protracted companyrespondence in the matter for over three L S5SCI--26 a years and eventually on May 16, 1953, the board of directors of the companypany refused to register the transfer. On December, 1, 1953, Sri S. K. Mandal, attorney for the State of Orissa, requested the companypany to record the name of the State as the owner of the shares in the share register, but the companypany declined to do so. On February 9, 1955, the State of Orissa filed an application under s. 38 of the Indian Companies Act, 1913 in the High Court of Orissa asking for rectification of the share register by inserting its name as the holder of the shares in place of the Maharaja. The companypany and the Maharaja were impleaded as respondents. The application was companytested by the companypany only. On November 22, .1956, Ray, J. allowed the application. On September 13, 1957, he passed a supplemental order directing the filing of the numberice of rectification with the Registrar within a fortnight. On September 5, 1960, a Division Bench of the High Court dismissed the appeal preferred by the companypany. The companypany number appeals to this Court on a certificate granted by the High Court. Both companyrts companycurrently held that 1 the title to the shares vested in the State of Orissa by operation of law 2 the, refusal of the board of directors to register the transfer was mala fide 3 the State of Orissa was entitled to rectification of the share register and a proper case for the exercise of the Courts jurisdiction under s. 38 of the Indian Companies Act, 1913 had been made out 4 the petition was number liable to be dismissed on the ground that the State had asked the companypany to register the name of the Secretary to the Government of Orissa, as the shareholder in place of the Maharaja. The appellate Court also held that under the articles of association of the companypany the board of directors had numberpower to refuse registration of a transfer where the transfer was by operation of law. The appellant challenges the companyrectness of these findings. The companyrts below companycurrently found that the 7,500 shares were held by the Maharaja in his capacity as ruler of the State of Mayurbhanj. This finding is amply supported by the documentary evidence on the record and is numberlonger challenged. The State of Mayurbhanj was one of the feudatory States of Orissa under the suzerainty of the British Crown. As from August 15, 1947, with the declaration of independence the paramountly of the British Crown lapsed. Thereafter, steps were taken for the integration of the State with the Dominion of India. On October 17, 1948, the Maharaja of Mayurbhanj signed an agreement for the merger of the State with the Dominion. By art. 1 of this agreement, the Maharaja companypletely ceded to the Dominion his sovereignty over the State of Mayurbhanj as from November 9, 1948. Article 4 of the agreement allowed the Maharaja to retain the ownership of his private properties only as distinct from the State properties. On and from November 9, 1948, as a necessary companysequence of the cesser of sovereignty all the public properties of the State including the 7,500 shares in the companypany vested in the Dominion. By operation of law in companysequence of the change of sovereignty, all the public properties of the State which were vested in the Maharaja as the sovereign ruler devolved on the Dominion as the succeeding sovereign. As from January 1, 1949, the Government of India in exercise of its powers under s. 3 2 of the Extra Provincial Jurisdiction Act 47 of 1947 delegated to the Government of Orissa the power to administer the territories of the merged State. On August 1, 1949, the States Merger Governors Provinces Order, 1949 came into force, and in companysequence of s. 5 1 of the Order, all property vested in the Dominion Government for purposes of governance of the merged State became from that date vested in the Government of Orissa, unless the purposes for which the property was held were central purposes. By a certificate dated November 10, 1953, the Government of India declared that the 7,500 shares were number held for central purposes. Under the Constitution which came into force on January 26, 1950, the territories of the merged State were included in the State of Orissa. By reason of these successive companystitutional changes, the shares became vested in the State of Orissa. The State is number the legal owner of the shares and the directors of the companypany are bound to enter its name in the register of members, unless there is one restrictive provision in the articles authorising them to refuse the registration. The companypany companytends that under its articles, the directors have the power to refuse the registration. It relies on art. 11, which reads- The Board of Directors shall have full right to refuse to register the transfer of any share or shares to any person without showing any cause or sending any numberice to the transferee or transferor, The Board may refuse to register any transfer of shares on which the Company has lien. Article 1-A attracts the regulations in Table A of the First Schedule to the Indian Companies Act, 1913 so far as they are applicable to private companypanies and are number inconsistent with the articles. The regulations in Table A make a distinction between transfer and transmission of shares. In respect of a transfer, they require that the instrument of. transfer shall be executed both by the transferor and the transferee. A transmission by operation of law in number such I transfer. In In re. Bentham Mills Spinning Company 1 , James, L.J. said In Table A the word transmission is put in companytradistinction to the word transfer. One means a transfer by the act of the parties, the other means transmission by devolution of law. Article 11 refers to transfers. A devolution of title by operation of law is number within its purview. Being a restrictive provision, the article must be strictly companystrued. In the instant case, the title to the shares vested in the State of Orissa by operation of law, and the State did number require an instrument of transfer from the Maharaja to companyplete its title., Article 11 does number companyfer upon the board of directors a power to refuse recognition of such a devolution of title. We may add that we express numberopinion on the question whether such an article applies to an involuntary transfer of shares by a Court sale having regard to the provisions of O.21, r. 80 of the Code of Civil Procedure with regard to the execution of necessary documents of transfer. Clause 22 of the regulations in Table A read with art. 1-A companyfers power upon the board of directors to decline registration of transmission of title in companysequence of the death or insolvency of a member. In the instant case, there is numbertransmission of title in companysequence of death or insolvency, and clause 22 has numberapplication. Under the articles, the directors had therefore numberpower to refuse registration of the devolution of title on the State of Orissa by operation of law in companysequence of the companystitutional changes. Though the State of Orissa had acquired title to the shares by operation of law, by way of abundant caution it obtained a deed of transfer and lodged it with the companypany together with the share scrip. The transfer deed was duly stamped and companyplied with all the formalities required by law. The claim of the State of Orissa based upon the transfer deed was within the purview of Art. 11. Even with regard to this claim, the Courts below companycurrently held that the board of directors acted mala fide in refusing to register the transfer. This finding is amply supported by the materials on the record. In spite of the fact that the State had filed with the companypany a certificate of the Collector of Stamp Revenue. West Bengal, that numberstamp duty was payable on the transfer, the companypany raised the objection that the transfer deed must be stamped. To avoid this objection, the Government stamped the deed and again lodged it with the companypany. For over three years, the directors delayed registration of the transfer on frivolous pretexts. On May 16, 1953, the directors without assigning any reason declined to register the transfer. Before the High Court, the companypany asserted that the registration was refused because the Maharaja of Mayurbhanj was under an obligation to execute an agreement companyferring valuable rights on the companypany and the State of Orissa had failed to honour this obligation. Reliance was, placed on cl. 6 of the companypanys memorandum of association, which stated that the companypany and the Maharaja proposed to enter into an agreement and a companyy of the proposed agreement was annexed. Clause 6 shows that there was a proposal between the parties to enter into an agreement, but there was numberconcluded agreement between them, number was there any binding obligation on the Maharaja to execute an agreement. The directors companyld number use their power of declining to register the transfer under Art. 11 for the purpose of forcing the State of Orissa to enter into the proposed agreement. Actually, the reason given at the trial was an afterthought. The Imperial Bank of India representing the Maharaja was pressing for registration of the transfer. By its letter dated March 17, 1953, the companypany assured the Bank that the registration would be effected shortly. Nevertheless, on May 16, 1953 the directors capriciously refused to register the transfer. The power under Art. 11 to refuse registration of the trans- fer is a discretionary power. The directors must exercise this power reasonably and in good faith. The Court can companytrol their discretion if they act capriciously or in bad faith. The directors cannot refuse to register the transfer because the transferee will number enter into an agreement which the directors companyceive it to be for the interests of the companypany. We cannot accept the companytention that the petition was liable to be dismissed because the State of Orissa had asked for registration in the name of the Secretary, Finance Department. No such objection was taken by the companypany, although it had taken numerous other objections. Moreover, by letter dated December 1, 1953, Shri S. K. Mandal, the attorney for the State of Orissa, had definitely called upon the companypany to record the name of the State as the owner of the shares in the share register. In spite of this letter, the companypany refused to make the necessary registration. The Maharaja of Mayurbhanj has ceased to be the owner of the shares. The State of Orissa, is number their owner, and has the legal right to be a member of the companypany and is entitled to say that the companypany should recognise its membership and make an entry on the register of the fact of its becoming a member and its predecessor-in-title having ceased to be a member. The name of the State of Orissa has, without sufficient reason, been omitted from the register and there is default in number entering on the register the fact of the Maharaja having ceased to be a member. The Courts jurisdiction under S. 38 is, therefore, attracted. The High Court rightly ordered the rectification in the exercise of its summary powers under S. 38. The jurisdiction created by S. 38 is very beneficial and should be liberally exercised. We see numberreason why the Court should deny the applicant relief under S. 38. The directors of the appellant companypany on the most frivolous of objections have prevented the State of Orissa from becoming a member for the last 16 years. It is a matter of regret that justice has been obstructed so long. There is numbermerit in this appeal. The appeal is dismissed with companyts.

Case appeal was rejected by the Supreme Court

CRIMINAL APPELLATE JURISDICTION- Criminal Appeal No. 97 of 1964. Appeal by special leave from the judgment and order dated January 29, 1964 of the Madhya Pradesh High Court Gwalior Bench in Criminal Revision No. 5 of 1963. N. Shroff, for the appellant. L. Anand and S. N. Anand, for the respondents. The Judgment of the Court was delivered by Sikri, J. This appeal by special leave is directed against the judgment of the Madhya Pradesh High Court Gwalior Bench in a Criminal Revision filed by M s. Azad Bharat Finance Company, one of the respondents in this appeal. The revision arose out of the following facts. On May 3, 1961, truck No. M.P.E. 1548, while it was parked at the bus- station, Guna, was searched by the Excise Sub-Inspector and he found companytraband opium weighing about three seers in it. Five persons were challaned for the alleged illegal possession of companytraband opium and for its transport, under ss. 9A and 9B of the Opitum Act 1 of 1878 as modified by the Opium Madhya Bharat Amendment Act, 1955, hereinafter referred to as the Madhya Bharat Act. Harbhajan Singh, one of the accused, is alleged to have absconded, and, therefore, he was tried separately later on. The Additional District Magistrate, Guna, companyvicted three persons and acquitted one person. Regarding the truck, he ordered that the final orders regarding the disposal of the truck would be passed later, on the companyclusion of the trial of Harbhajan Singh. It may be Mentioned that Harbhajan Singh had taken this truck. under a hire-purchase agreement from M s. Azad Bharat Finance Co. and he Was number present in or near the truck when the companytraband opium was taken possession of by the Excise Officer. On May 28, 1962, M s. Azad Bharat Finance Co, applied in the Court of Shri M. C. Bohre, in which the trial of Harbhajan Singh was going on. for the release of the truck. On September 7. 1962. Harbhajan Singh was acquitted by the Magistrate but he ordered that the truck be companyfiscated to the State. The Magistrate was of the opinion that s. 11 of the Madhya Bharat Act showed ,Clearly that the truck in which the opium was carried had to be forfeited in all circumstances. He observed- By the use of the word shall this Court was ,compelled that the truck be seized, may be there was the hand of the owner in it or number and neither there is any provision that the truck owner had the knowledge or number of the opium being carried. Both Harbhajan Singh and M s. Azad Bharat Finance Co. filed revisions in the Court of the Sessions Judge. The Sessions Judge also held that the word shall in s. 11 d was mandatory and number directory. He observed- Though it is companyrect that the truck was number used for carrying opium with the knowledge or companynivance of the owner but section 11 d as applicable in this state does number give discretion to the Court in number ordering the companyfiscation of the companyveyance used for carrying companytraband opium. M s. Azad Bharat Finance Co. filed a revision in the High Court. The High Court held as follows- The word shall occurring in Sec. 11 of the P. Opium Act means may and that it companyfers discretion on the companyrt to companyfiscate the companyveyance provided it belongs to the offender. But where it is number so, and, the owner of the truck has neither authorised the offender to transport opium, number is there any reason to believe that the owner knew that his vehicle was likely to be used for transporting companytraband opium, the companyveyance should number be companyfiscated because companyfiscation in such circumstances would be tantamount to punishing one, who has number companymitted any offence under the Opium Act. The learned companynsel for the appellant, Mr. Shroff, companytends that the Opium Madhya Bharat Amendment Act, 1955 15 of 1955 which amended the Opium Act, 1878, deliberately employed a different phraseology with the intention of making it obligatory on a Court to companyfiscate a vehicle in which companytraband opium had been transported. He points out that in the Opium Act, 1878, in s. 11, the. relevant words Ate as follows- S. 11 Confiscation of opium.-In any case in which an offence under section 9 has been companymitted,- The vessels, packages and companyering in which any opium liable to companyfiscation under this section is found, and the other companytents if any of the vessel or package in which such opium may be companycealed, and the animals and companyveyances used in carrying it, shall likewise be liable to companyfiscation. He stresses the words liable to companyfiscation which according to him and certain authorities clearly give a discretion to the Court whether to companyfiscate the vehicle or number. In the Madhya Bharat Amendment Act the section providing for companyfiscation is as follows- S. 11. In any case in which an offence under Sections 9, 9A, 9B, 9C, 9D, 9E, 9F and 9G has been companymitted, the property detailed herein below shall be companyfiscated- d the receptacles, packages and companyerings in which any opium liable to companyfiscation under this Section is found, and the other companytents if any of the receptacle or package in which such opium may be companycealed, and the animals, carts, vessels, rafts and companyveyances used in carrying it. In our opinion, the High Court was companyrect in reading s. 11 of the Madhya Bharat Act as permissive and number obligatory. It is well-settled that the use of the word shall does number always mean that the enactment is obligatory or mandatory, it depends upon the companytext in which the word shall occurs and the other circumstances. Three companysiderations are relevant in companystruing s. 1 1. First, it is number denied by Mr. Shroff that it would be unjust to companyfiscate the truck of a person if he has numberknowledge whatsoever that the truck was being used for transporting opium. Suppose a person steals a truck and then uses it for transporting companytraband opium. According to Mr. Shroff, the truck would have to be companyfiscated. It is well recognised that if a statute leads to absurdity, hardship or injustice, presumably number intended, a companystruction may be put upon it which modifies the meaning of the words, and even the structure of the sentence. Vide Tirath Singh v. Bachittar Singh 1 . Secondly, it is a penal statute and it should, if possible, be companystrued in such a way that a person who has number companymitted or abetted any offence should number be visited with a penalty. Thirdly, if the meaning suggested by Mr. Shroff is given, s.11 d of the Madhya Bharat Act may have to be struck down as imposing unreasonable restrictions under Art. 19 of the Constitution. Bearing all these companysiderations in mind, we companysider that s. II of the Madhya Bharat Act is number obligatory and it is for the Court to companysider in each case whether the vehicle in which the companytraband opium is found or is being transported should be companyfiscated or number, having regard to all the circumstances of the case. Mr. Shroff then companytends that if the matter is discretionary. the High Court should number have interfered in the discretion exercised by the learned Sessions Judge. But apart from the question that this point was number raised before the High Court, both the Magistrate and the Sessions Judge ordered companyfiscation of the truck on the ground that they had numberoption in the matter.

Case appeal was rejected by the Supreme Court

CRIMNAL APPELLATE JURISDICTION Criminal Appeal No. 110 of 1965. Appeal from the judgment and order dated January 13, 1965 of the High Court at Allahabad in Criminal Revision No. 1318 of 1964. Frank Anthony, M. L. Sethi, J. C. Talwar and R. L. Kohli, for the appellant. P. Kapur, respondent No. 1, in person. P. Rana, for respondent No. 2. The Judgment of the Court was delivered by Bhargava, J. This appeal filed under certificate granted by the High Court at Allahabad is directed against an order passed by that Court dismissing a revision application by which the appellant, M. L. Sethi, desired the vacation of an order passed by the Sessions Judge of Saharanpur upholding two orders of the Additional District Magistrate Judicial , Saharanpur, dated 6th August, 1963 and 5th October, 1963. By these orders, the Magistrate dismissed two applications presented by the appellant for dismissing a companyplaint pending before him for companymission of offences under sections 21 1, 204 and 385 of the Indian Penal Code. A further prayer was made for an order by this Court qushing the proceedings pending in the Court of that Magistrate. The facts necessary for deciding this appeal may be stated briefly. on December 10, 1958, the appellant lodged a report with the Inspector-General of Police, Chandigarh against P. Kapur hereinafter referred to as the respondent and his mother-in-law charging them with companymission of offences punishable under sections 420, 109, 114 and 120-B, I.P.C. It does number appear to be necessary to give the details of the allegations made in that report. The charge in that First Information Report was based on the allegation that the respondent and his mother-in-law, by companyspiring together, cheated the appellant and his wife of a sum of Rs. 20,000/- by persuading the appellant to take a sale-deed of some land on certain false representations and on suppression of facts indicating that on the date when the sale-deed by the respondents mother-in-law was executed in favour of the wife of the appellant, the title of the former had already been extinguished, as the land had been acquired by the Government under the Land Acquisition Act. The offence was registered as a companynizable offence and investigation was started. On April 11, 1959, the respondent filed a companyplaint in the Court of Judicial Magistrate, 1st Class, Chandigarh, against the appellant for companymission of offences under sections 204, 211 and 385 I.P.C. In this companyplaint, the respondent alleged that the land was sold by his mother-in- law to the appellants wife as a favour to the appellant and that at that time, numbermisrepresentations at all were made in respect of any facts. The companyplaint added that the appellant was fully aware of the land acquisition proceedings but because of fixation of low rate of companypensation in the acquisition proceedings,the appellant suffered a loss of nearly Rs. 13,000/-. The appellant,being a clever criminal lawyer, went to the respondents mother-in-law, Smt. Kaushaliya Devi, and demanded the sum of Rs. 13,000/-,and when she refused, he threatened her with dire companysequences of criminal proceedings against her and her son-in-law, the respondent.A similar threat of criminal proceedings was also later given to the respondent himself by the appellant and thereafter, the First Information Report was lodged with the Inspector-General of Police by the appellant on December 10, 1958. The charge in the companyplaint further was that the allegations made in the First Information Report by the appellant were false to his knowledge and were companytradicted by the appellants own letters, writings and other companyrespondence.It was also stated that the false report to the police was made with the knowledge and intention of putting the respondent in fear of ,injury to his fair name and reputation in service and otherwise and of being put under arrest and harassment in a criminal trial and thereby to induce him to deliver to the appellant Rs. 13,000/- and submit to other terms that the appellant may choose to impose. The last allegation was that the appellant was guilty of the offence under s. 204, I.P.C., for secreting five documents which were enumerated in the companyplaint, and this offence was alleged to have been companymitted, because if these documents had been presented in time, the Police would number have entertained the companyplaint which led to a harassing investigation against the respondent. This companyplaint filed by the respondent against the appellant,as well as the proceedings instituted by the Police on the basis of the First Information Report were transferred under the orders of this Court to the Court of the Additional District Magistrate, Saharanpur. The case against the respondent and his mother-in-law based on the First Information Report ended in an order of discharge passed by the High Court of Allahabad on December 10, 1962, when the charge framed against the respondent and his mother-in-law by the trying Magistrate was quashed. On the record, the material availa- ble relating to the proceedings based on the F.I.R. dated December 10, 1958, is that it was on July 18, 1959 for the first time that the respondent was arrested in companynection with that report and the challan by the Police for trial of the respondent was presented to the Court on July 25, 1959. There is numbermaterial to show that between December 10 1958, when the First Information Report was lodged, and July 18, 1959 when the respondent was arrested in companynection with it, there was, at any stage, any order passed by any Magistrate in companynection with the investigation that was going on. As we have mentioned earlier, the revisions before the Sessions Judge, and the High Court, arose out of two orders made by the Additional District Magistrate on August 6, 1963, and October 5, 1963. The first order was made on an application presented by the appellant on May 6, 1963 in which he companytended that numberoffence was disclosed on the allegations made in the companyplaint and on the statement of the companyplainant recorded by the Magistrate at Chandigarh, and, further, that, in any case, the trial was barred on account of want of requisite previous sanction as provided in S. 195 of the Code of Criminal Procedure. It was also alleged that the facts were so inter-mixed that the trial of any other offence separate from the offence under S. 211, P.C., was number permissible or possible, so that the Magistrate was requested number to proceed with the trial and to withdraw the order summoning the appellant and in the alternative, the prayer was that the appellant may be discharged under S. 253, Cr. P.C., as the charge against him was groundless. The second order of the Magistrate dated 5th October, 1963, was passed on the application of the appellant dated August 12, 1963, in which it was prayed that the Court may number take companynizance ,of the companyplaint as instituted, and the trial under S. 252, Cr. P.C. may number proceed. The prayer was again based on the ground that companynizance of the offence under S. 21 1, I.P.C. companyld number be taken in view of the provisions of S. 195 1 a b , Cr. P.C., under which the ,Court was empowered to proceed in respect of that offence only when there was a companyplaint, in writing by the authority companycerned. The Additional District Magistrate by his two orders, rejected the companytention that s. 195, Cr. P.C., barred this particular companyplaint which had been filed against the appellant. The main ground for these orders was that numberproceedings were pending in any Court when the companyplaint against the appellant was filed in the Court of the Magistrate at Chandigarh for the offences under sections 204, 21 1, and 385, I.P.C. and companysequently, s. 195, Cr. C., was inapplicable. That is the view of the Addl. District Magistrate which has been upheld both by the Sessions Judge and the High Court and companysequently, the appellant has number companye up to this Court in this appeal. On behalf of the appellant, the first submission made by his companynsel, Mr. Frank Anthony, Was that the making of a report of a companynizable offence with the police is both institution of a criminal proceeding as well as charging a person with having companymitted an offence, so that, in this case, when the appellant lodged his First Information Report on December 10, 1958, with the InspectorGeneral of Police, it must be held that he had instituted a criminal proceeding against the respondent, as well as he had charged him with having companymitted the offences mentioned in that report within the meaning of s. 21 1, I.P.C. In support of this proposition, learned companynsel relied on a Full Bench decision of the Calcutta High Court in Karim Buksh v. The Queen-Empress 1 , and a Full Bench decision of the Kerala High Court in Albert State of Kerala and Another. 2 It was urged that, on this interpretation, when the respondent filed a companyplaint against the appellant under s. 21 1, I.P.C., together with other offences, the provisions of s. 195, Cr. P.C., became attracted. It appears to us that in this case it is number at all necessary to go into the question whether, whenever a companyplaint of a companynizaable offence is filed, it must be held that the companyplainant is instituting or causing to be instituted a criminal proceeding, or is merely charging the person named in the report with having companymitted the offences mentioned therein, because, during the companyrse of argument in the appeal before us, numbercontention was put forward that numberoffence under s. 211, I.P.C., was made out and that the companyplaint of the respondent against the appellant was wrongly being treated as in respect of a charge under s. 21 1. Up to the stage of the revision before the High Court, some attempt was made on behalf of the appellant to plead that the facts alleged by the respondent in his companyplaint to the Court did number companystitute an offence under s. 21 1, I.P.C. companymitted by the appellant but, in this Court, Mr. Frank Anthony on behalf of the appellant gave up this plea and, in fact, proceeded to urge before us that the companyplaint of the respondent against the appellant did specifically include in it a charge under s. 21 1, P.C. On behalf of the respondent and the State Government also there was numbersuggestion that the companyplaint against the appellant was number in respect of the offence under s. 21 1, P. C. It is companysequently unnecessary at this stage to go into the question whether the facts given in the companyplaint, or the facts which may ultimately be found proved after the trial, do or do number companystitute an offence under s. 21 1, P.C. and if they do, whether those facts show that the I.L.R.17 Cal. 574. A.I.R. 1966 Kerala 11. appellant had instituted a criminal proceeding against the respondent or had only charged him with having companymitted the offences mentioned in his report. That is a point which may have to be decided at the companyclusion of the trial of the appellant and companysequently, we refrain from going into this question at this stage. The only point that falls for determination by this Court is whether, in this case, companynizance of the companyplaint, which included an offence under s. 21 1, I.P.C., filed by the respondent against the appellant, was rightly or wrongly taken by the Courts. The companyplaint, as we have mentioned earlier, was filed by the respondent in the Court of the Judicial Magistrate at Chandigarh on April 11, 1959, and on the same day, companynizance of the offence was taken by that Magistrate under s. 190, Cr. P.C., where after that Magistrate proceeded to record the statement of the respondent under s. 200, Cr. P.C. Before this companynizance was taken, the appellant had already lodged his first Information Report against the respondent with the Inspector-General of Police on December 10, 1958. In companynection with that report, investigation by the Police must have been going on, though numbere of the judgments of the lower Courts mentioned what particular steps had been taken in that investigation up to the 11th April, 1959, when this companyplaint was filed by the respondent against the appellant. The facts found only mentioned that in companynection with that First Information Report of the appellant, the respondent was arrested on July 18, 1959, and subsequently, the charge- sheet was submitted by the Police to the Court of the Magistrate on July 25, 1959. This arrest and submission of the charge-sheet were both subsequent to the filing of the companyplaint by the respondent. In these circumstances, we have to examine whether the Magistrate at Chandigarh was companypetent to take companynizance of this companyplaint on April 11, 1959, in view of the provisions of s. 195 of the Code of Criminal Procedure. In dealing with this question of law, the important aspect that has ,to be kept in view is that the point of time at which the legality of the companynizance taken has to be judged is the time when companynizance is actually taken under S. 190, Cr. P.C. Under the Code of Criminal Procedure which applies to trials of such cases, the only provision for taking companynizance is companytained in s. 190. Section 195, which follows that section, is, in fact, a limitation on the unfettered power of a Magistrate to take companynizance under s.190. Under the latter section companynizance of any offence can be taken by any Presidency Magistrate, District Magistrate or Sub-Divisional Magistrate, and any other Magistrate specially empowered in this behalf a upon receiving a companyplaint of facts which companystitute such offence b upon a report in writing of such facts made by any police-officer and c upon information received from any person other than a police-officer, or upon his own knowledge or suspicion, that such offence has been companymitted. In the present case, the Judicial Magistrate at Chandigarh had before him the companyplaint filed by the respondent, and if s. 190 stood by itself, he was companypetent to take companynizance of it under clause a of sub-s. 1 of that section. This power of taking companynizance was, however, subject to the subsequent provisions companytained in the Code of Criminal Procedure including that companytained in s. 195. Sub-s. 1 of s. 195, which is relevant for our purposes, is reproduced below -- 195 1 . No Court shall take companynizance- a of any offence punishable under sections 172 to 188 of the Indian Penal Code, except on the companyplaint in writing of the public servant companycerned, or of some other public servant to whom he is subordinate b of any offence punishable under any of the following sections of the same Code, namely, sections 193, 194, 195, 196, 199, 200, 205, 206, 207, 208, 209, 210, 211 and 228, when such offence is alleged to have been companymitted in, or in relation to, any proceeding in any Court, except on the companyplaint in writing of such Court or of some other Court to which such Court is subordinate or c of any offence described in section 463 or punishable under section 471, section 475 or section 476 of the same Code, when such offence is alleged to have been companymitted by a party to any proceeding in any Court in respect of a document produced or given in evidence in such proceeding, except on the companyplaint in writing of such Court, or of some other Court to which such Court is subordinate. This sub-section thus bars any Court from taking companynizance of the offences mentioned in clauses a , b and c , except when the companyditions laid down in those clauses are satisfied. In the case of an offence punishable under S. 211, I.P.C., the mandatory direction is that numberCourt shall take companynizance of any offence punishable under this section, when such offence is alleged to have been companymitted in, or in relation to, any proceeding in any Court, except on the companyplaint in writing of such Court or of some other Court to which such Court is subordinate. This provision in clause b of sub-s. 1 of s. 195 is thus clearly a limitation on the power of the Court to take companynizance under s. 190. Consequently, it is at the stage when a Magistrate is taking companynizance under s. 190 that he must examine the facts of the companyplaint before him and determine whether his power of taking companynizance under s. 190 has or has number been taken away by cl. b of sub-s. 1 of s. 195, Cr. P.C. In the present case, therefore, at the time when this companyplaint was filed by the respondent in the Court of the Judicial Magistrate at Chandigarh, it was necessary and incumbent on that Magistrate to examine whether his power of taking companynizance of the offence was limited by the provisions of s. 195 1 b . He had, therefore, to determine whether companynizance of this companyplaint charging the appellant with companymission of an offence under s. 211, I.P.C., companyld number be taken by him, because that offence was alleged to have been companymitted in, or in relation to, any proceeding in any Court, and if he found that it was so, whether a companyplaint in writing by such Court or some other Court to which such Court was subordinate was necessary before he companyld take companynizance. Consequently, in deciding this appeal, this Court has to examine whether on the date when companynizance was taken by the Judicial Magistrate at Chandigarh such companynizance was barred under s. 195 1 b , Cr. P.C., because the offence punishable under s. 211, I.P.C., included in the companyplaint was alleged to have been companymitted in, or in relation to, any proceeding in any Court. In the interpretation of this cl. b of sub-s. 1 of s. 195, companysiderable emphasis has been laid before us on the expression in, or in relation to, and it has been urged that the use of the expression in relation to very companysiderably widens the scope of this -section and makes it applicable to cases where there can even in future be a proceeding in any Court in relation to which the offence under s. 211, I.P.C., may be alleged to have been companymitted. A proper interpretation of this provision requires that each ingredient in it be separately examined. This provision bars taking of companynizance if all the following circumstances exist, viz., 1 that the offence in respect of which the case is brought falls under s. 211 I.P.C. 2 that there should be a proceeding in any Court and . 3 that the allegation should be that the offence under s. 211 was companymitted in, or in relation to, such a proceeding. Unless all the three ingredients exist, the bar under s. 195 1 b against taking companynizance by the Magistrate, except on a companyplaint in writing of a Court, will number companye into operation. In the present case also, therefore, we have to see whether all these three ingredients were in existence at the time when the Judicial Magistrate at Chandigarh proceeded to take companynizance of the charge under s. 211, P.C., against the appellant. There is, of companyrse, numberdoubt that in the companyplaint before the Magistrate a charge under s211, I.P.C., against the appellant was included, so that the first ingredient clearly existed. The question on which the decision in the present case hinges is whether it can be held that any proceeding in any Court existed when that Magistrate took companynizance. If any proceeding in any Court existed and the offence under s. 211, I.P.C., in the companyplaint filed before him was alleged to have been companymitted in such a proceeding, or in relation to any such proceeding, the Magistrate would have been barred from taking companynizance of the offence. On the other hand, if there was numberproceeding in any Court at all in which, or in relation to which, the offence under s. 211 companyld have been alleged to have been companymitted, this provision barring companynizance would number be attracted at all. In this case, as we have already indicated when enumerating the facts, the companyplaint of which companynizance was taken by the Judicial Magistrate at Chandigarh was filed on April 1 1, 1959, and at that stage, the only proceeding that was going on was investigation by the Police on the basis of the First Information Report lodged by the appellant before the Inspector-General of Police on December 10, 1958. There is numbermention at all that there was, at that stage, any proceeding in any Court in respect of that F.I.R. When exa- mining the question whether there is any proceeding in any Court, there are three situations that can be envisaged. One is that there ,may be numberproceeding in any Court at all. The second is that a proceeding in a Court may actually be pending at the point of time when companynizance is sought to be taken of the offence under s. 211, I.P.C. The third is that, though there may be numberproceeding pending in any Court in which, or in relation to which, the offence under s. 211, P.C., companyld have been companymitted, there may have been a proceeding which had already companycluded and the offence under s. 211 may be alleged to have been companymitted in, or in relation to, that proceeding. It seems to us that in both the latter two circumstances envisaged above, the bar to taking companynizance under s. 195 1 b would companye into operation. If there be a proceeding actually pending in any Court and the offence under s. 21 1, I.P.C., is alleged to have been companymitted in, or in relation to, that proceeding, s. 195 1 b would, clearly apply. Even if there be a case where there was, at one stage, a proceeding in any Court which may have companycluded by the time the question of applying the provisions of s. 195 1 b arises, the bar under that provision would apply if it is alleged that the offence under s. 211, I.P.C., was companymitted in, or in relation to, that proceeding. The fact that the proceeding had companycluded would be immaterial, because s. 195 1 b does number require that the proceeding in any Court must actually be pending at the time when the question of applying this bar arises. In the first circumstance envisaged above, when there is numberproceeding pending in any companyrt at all at the time when the applicability of S. 195 1 b has to be determined, number earlier proceeding which may have been of this sub-section would number be attracted, has there been any companycluded, the provisions because the language used in it requires that there must be a proceeding in some Court in, or in relation to, which the offence under s. 21 1, I.P.C. is alleged to have been companymitted. In such a case, a Magistrate would be companypetent to take companynizance of the offence under s. 211 P.C., if his jurisdiction is invoked in the manner laid down in s. 190 of the Code of Criminal Procedure. Mr. Frank Anthony on behalf of the appellant urged before us that even in those cases where there may be numberpending proceeding in any Court, number any proceeding which has already companycluded in any Court, the bar of s. 195 1 b should be held to be applicable if it is found that a subsequent proceeding in any Court is under companytemplation. We do number think that the language of cl. b of sub-s. 1 of s. 195 can justify any such interpretation. A proceeding in companytemplation cannot be said to be a proceeding in a Court. When there is mere companytemplation of starting a proceeding in future, there is numbercertainty that the proceeding will companye into existence. It will always be dependent on the decision to be taken by the person who is companytemplating that the proceeding be started and any interpretation of the law, which will make the applicability dependent on a future decision to be taken by another person, would, in our opinion, be totally incorrect. The applicability of this provision at the sweet will of the person companytemplating the proceeding will introduce an element of uncertainty in the applicability of the law and such an interpretation must be avoided. In this case, apart from this circumstance, the language used clearly lends it- self to the interpretation that the bar has been placed by the Legislature only in those cases where the offence is alleged to have been companymitted in, or in relation to, any proceeding actually pending in any Court, or any proceeding which has already been taken in any Court. There is numberhing in the language to indicate that the Legislature also intended to lay down this bar if a proceeding in a Court was still under companytemplation and if and when that proceeding is taken, it may be found that the offence alleged to have been companymitted was, in fact, companymitted in, or in relation to, that proceeding. In this companynection, the question of time when the applicability of this provision has to be determined, assumes importance. It appears to us that at the time when in the present case the Judicial Magistrate at Chandigarh had to determine the applicability of this bar, he companyld number be expected to companye to a decision whether any proceeding in any Court was under companytemplation in, or in relation to, which the offence under s. 21 1, I.P.C., of which he was asked to take companynizance, was alleged to have been companymitted. In fact, it would be laying on the Magistrate a burden which he companyld number be expected to discharge properly and judicially as numberMagistrate companyld determine in advance of a proceeding in a Court whether the offence under s. 21 1, I.P.C., of which he is required to take companynizance, will be an offence which will be found subsequently to have been companymitted in relation to the companytemplated proceeding to be taken thereafter. This interpretation, sought to be placed on this provision on behalf of the appellant, cannot, therefore, be accepted. In this companynection, reliance was placed by learned companynsel for the appellant on a series of cases decided by various High Courts. In Re Vasudeo Ramchandra Joshi 1 , the High Court of Bombay quashed proceedings for prosecution of a lawyer who had instigated some witnesses to give false evidence. It appears that a pleader was defending an accused person in a proceeding pending before a Magistrate against his client in respect of a charge under s. 401, P.C. On April 1, 1922, an application made by the pleader on behalf of the accused for bail was refused. Then, the statements of three witnesses were recorded under s. 164, Cr. P.C., on April 18, 1922, and from these statements it appeared that on April 10, these witnesses had an interview with the pleader who had instigated them to give false evidence. On April 15, another case against the pleaders client in respect of a dacoity was sent up to the Magis trate, and the allegation against the pleader was that it was in companynection with this case of dacoity which was sent up to the Magistrate on April 15, that the pleader had instigated the witnesses to give false evidence. On June 2, the witnesses were actually examined before the Magistrate in this dacoity case which was sent up on April 15 and then on June 7, a companyplaint was filed by the Police Officer against the pleader charging him with having abetted the giving of false evidence. It was in these circumstances that the High Court held that the provisions of s. 195 1 b , Cr. P.C., were applicable and the case against the pleader on the charge filed by the Police Officer was number maintainable when there was numbersanction by the Magistrate who was enquiring into the dacoity case in relation to which the witnesses were instigated to give false evidence. On the facts, it is clear that that case is distinguishable from the case before us. In that case, the charge by the Police Officer was filed on June 7, and on that date a proceeding was already pending before the Magistrate in relation to which the witnesses had been instigated to give false evidence. The provisions of s. 195 1 b were, there- fore, clearly applicable. Dealing with this matter, one of the learned Judges of the High Court held that the words are very general, and are wide enough, in my opinion, to companyer a proceeding in companytemplation before a Criminal Court, though it may number have begun at the date when the offence was companymitted. If that is so, it is plain that sanction was necessary in the present case, and, therefore, the proceedings which have been undertaken are nun and void without such sanction These views expressed by Crump, J., had been relied upon by learned companynsel in support of his proposition that even if an offence is companymitted in relation to a proceeding which is in companytemplation, the provisions of s. 195 1 b , Cr. P.C., are attracted. We do number think that any such general proposition can be inferred from that decision. It is to be numbered that in that case though it was held that the offence of instigation of witnesses to give false evidence was companymitted when proceedings Al.R. 1923 Bom. 105. before a criminal Court were still under companytemplation in which the witnesses were to appear, the actual companyplaint f9r that instigation was filed after the Magistrate was already seized of the proceeding in which the witnesses were instigated to give false evidence. On the date on which the companyplaint was filed by the Police Officer charging the pleader with instigation of giving false evidence, there was already a pending proceeding before the Court in relation to which that offence had been companymitted. Consequently, the observations in that case should be interpreted as limited to laying down that the provisions of s. 195 1 b , Cr. C., will be attracted even if the offence charged was companymitted while the proceeding was in companytemplation, and that there was numberdecision by the Court that the sanction under s. 195 1 b would be necessary even in those cases where the proceeding is still under companytemplation on the date when the companyplaint is filed before the Court for companymission of the offence mentioned in s. 195 1 b . In Ghulam Rasul v. Emperor 1 the Police investigated a report that a certain person had stolen the companyplainants watch from his car, and in the investigation, the Police came to the companyclusion that the report was false and that the watch had been removed by the companyplainant himself. The case was accordingly reported to the Magistrate for cancellation and then the Police prosecuted the companyplainant under ss. 193 and 211, I.P.C. The learned Judge of the Lahore High Court in dealing with the case held I am clear that the words in this sub-section in relation to any proceeding in any Court apply to this case of a false report or a false statement made in an investigation by the police with the intention that there shaH, in companysequence of this, be a trial in the Criminal Court, and I find support for this view in the case of Chuhar Mal-Nihal Mal v. Emperor 2 . The decision in the words in which the learned Judge expressed himself appears to support the argument of learned companynsel for the appellant in the present case but we think that very likely in that case, the learned Judge was influenced by the circumstance that the case had been reported by the Police to the Magistrate for cancellation. He appears to have held the view that the Magistrate having passed an order of cancellation, it was necessary that the companyplaint should be filed by the Magistrate, because s. 195 1 b had become applicable. If the learned Judge intended to say that without any proceeding being taken by the Magistrate in the. case which was investigated by the Police it was still essential that a companyplaint should be filed by the Magistrate simply because a subsequent proceeding following the police investigation was companytemplated, we companysider that his decision cannot be accepted as companyrect. A.I.R. 1936 Lah. 238. 2 A.I.R 1929 Sind 132. In Balak Ram and Others v. Emperor , it was held that a person who sets the criminal law in motion by making a false charge to the police of a companynizable offence by definitely charging a person with having companye to his house for the purpose of dacoity, and insisting for investigation, institutes criminal proceedings within the meaning of s. 211, and that criminal proceedings are just as much instituted within the meaning of s. 211 when first information of a companynizable offence is given to the Police under s. 154, Cr. P.C., as when a companyplaint is made direct to a Magistrate under s. 200, Cr. P.C. We do number think that these companyments made in that case can be interpreted as laying down that criminal proceedings instituted by lodging a First Information Report of a companynizable offence to the Police amount to institution of a criminal proceeding in a Court. What the Court in that case was deciding was that there can be criminal proceedings apart from proceedings instituted by a companyplaint in Court for purposes of s. 211, P.C. That decision does number in any way attempt to lay down that a proceeding in investigation is a proceeding in a Court. In Ramdeo v. The State and Another 2 , the question arose about the applicability of s. 195 to a companyplaint made for an offence under s. 182, I.P.C., by a Police Officer for giving false information to him in a report lodged by an informant. In that companynection, the Court companysidered the scope of s. 195 and held that an offence under s. 211, I.P.C., in companynection with a false charge made before the Police is an offence companymitted in relation to proceedings in a Court companytemplated at the time of lodging information with the Police. But in that case again the companyplaint by the Police was held to be incompetent only on the further basis that the proceedings under companytemplation at the time when the offence under s. 21 1, I.P.C., was companymitted by lodging the report, were actually instituted later. This institution of that case took place before the Police lodged the companyplaint for the offence under s. 182, I.P.C. Thus, this was again a case where a proceeding was actually pending in a Court at the time when companynizance of the offence under s. 182 was taken, and it was held that the charge under s. 182 was companyered by a charge under s. 21 1, I.P.C. and that the latter offence had been companymitted in relation to the proceeding which had companye into existence in the Court at the time of taking companynizance. In Har Prasad v. Hans Ram and Others 3 , a private companyplaint was filed before a Magistrate disclosing companymission of offences under ss. 467 and 471, I.P.C., at a time when there were numberproceedings pending in any Court. These offences were companymitted for the purpose of using the forged documents in the Court of the Tahsildar who was to deal with subsequent mutation proceedings A.I.R. 1942 Oudh 100. 2 A.I.R. 1962 Raj. 149. A.I.R. 1966 All. 124. and they were, in fact, so used subsequently. It was in these circumstances that the Court held that the words in respect of in S. 195 1 c were wide enough to include even a document which was prepared before the proceedings started in a Court of law but was produced or given in evidence in that proceeding. It was further held that in this view of the matter, although the document was fabricated before the proceedings started in Tahsildars Court and although two of the opposite parties were number impleaded in the mutation proceedings, it must be held that the companynizance of the offence was barred by s. 195 1 c . Once again, it will be numbericed that all that the Court disregarded was the fact that the substantive offence mentioned in S. 195 was companymitted for a proceeding which was under companytemplation, but the proceedings in Court for that offence were held barred by S. 195 only because subsequently, proceedings in the Court of the Tahsildar were actually taken and the documents companycerned were used in it and were found to have been forged in relation to those proceedings. On the date on which the companynizance was taken, the proceeding, in relation to which the offence had been companymitted, was already pending. In The Queen v. Subbanna Gaundan and Others , it was found that some persons were companyvicted under s. 21 1, I.P.C., for falsely charging the companyplainant with having companymitted the offence of highway robbery, knowing that there was numberjust or lawful ground for such charge. The charge had been preferred before an Inspector of Police, who disbelieved and refused to act upon it. It was held that to companystitute the offence of preferring a false charge companytemplated in S. 21 1, I.P.C., it was number necessary that the charge should be before a Magistrate. In that companynection, the Court further held that it is enough in a case like that one if it appears that the charge was still number pending and that an indictment for falsely charging companyld number be sustained if the accusation were entertained and still remained under proper legal enquiry. Reliance is placed on the last dictum that an indictment for falsely charging, as in the present case, cannot be sustained while the accusation made in that alleged false charge is still under proper legal enquiry. In the present case, there is numberdoubt that at the stage when the companyplaint was filed by the respondent against the appellant for the offences under ss. 204, 211 and 385, P.C., enquiry on the First Information Report lodged by the appellant was still being companyducted by the Police. In such a case, there may be numberjustification for the Police bringing a charge of false information being given to it until the investigation is companypleted. But we do number find any requirement anywhere in law that the person affected by the false charge companyld number file his companyplaint in Court until the Police had decided that the charge was false. The discretion of the person affected by the false charge was number to be fettered or tied down to the view taken by the Police. 1 1862 1863 I Madras High Court Reports, 30. The case of Gati Mandal v. The, Emperor is again of numberhelp, because in that case also the only principle that was laid down was that a Magistrate had numberjurisdiction to order a prosecution for making a false companyplaint, till the companyplaint was dismissed. That case does number relate to the right of a private person to file a companyplaint at a stage when numbercase is pending in any Court against him and numberquestion of intervention of any Court under s. 195, Cr.P.C., arises. In Fakir Mohamed v. Emperor 2 , it was held that if there is numbercomplaint by a public servant as required by S. 195, the defect cannot be said to be an error, omission or irregularity in a companyplaint, because the companyplaint was never made. Before an error, omission or irregularity in a companyplaint can be cured, the companyplaint must exist, and companysequently, the provisions of s. 537, Cr. P.C. cannot apply. In such a case, the trial without a companyplaint as required by s. 195 would be void. These companyments brought to our numberice do number have any particular bearing on the question that we are called upon to examine. In the same case, the Additional Judicial Commissioner of Sind interpreted the effect of s. 195, Cr. P.C. He was of the view that section 195, though it forms a part of the Code of Procedure, in reality companytains a provision of the sub- stantive law of crimes. For s. 195 does number deal with the companypetency of the Courts, number lays down which of several Courts shall, in any particular matter, have jurisdiction to try the case and yet the language of s. 195 is apt to these matters, and it forms part of the Chapter entitled of the jurisdiction of the Criminal Courts in enquiries and trials. Section 195 in reality lays down that the offences therein referred to or rather the acts companystituting those offences shall number be deemed to be any offences at all, except on the companyplaint of the persons or the Courts therein specified it enhances the companynotation of those offences and limits the scope of their definition. This limitation of the definition is brought about by saying that numberCourt shall take companynizance of the offences unless this companydition, requisite for initiation of proceedings, is satisfied. Relying on these observations, learned companynsel for the appellant urged before us that in this case also, we should hold that numberoffence under s. 211 companyld companye into existence and numbercharge for that companymission companyld be brought against the appellant, unless there was a companyplaint by a Court under S. 195, Cr. P.C. We are unable to agree with the view expressed by the learned Additional Judicial Commissioner that S. 195, Cr. P.C., really lays down that the offences therein referred to shall number be deemed to be any offences at all, except on the companyplaint of the persons or the Courts therein specified. An offence is companystituted as soon as it is found that the acts which companystitute that offence have been companymitted by the person accused of the offence. It remains an offence whether it is triable by a Court or number. If a law prescribes punishment for that offence, 1 27 Cr. L.J. 1105. upSC.I./66-6 I.R. 1927 Sind 10 the fact that the trial of that offence can only be taken up by companyrts. after certain specified companyditions are fulfilled does number make that offence any the less an offence. The limitation laid down by s. 195, Cr. P.C., is, in fact, a limitation only on the power of Courts to take companynizance of, and try, offences and does number in any way have the effect of companyverting an act, which was an offence, into an innocent act. We cannot, therefore, subscribe to the view expressed in that case. There is the further circumstance that in the case before us we have held that the provision companytained in s. 195 1 b was number applicable at the time when the Judicial Magistrate at Chandigarh took companynizance of the offence, and companysequently, this principle sought to be laid down by the Additional Judicial Commissioner of Sind has numberapplication. In Gunamony Sapui v. Queen Empress , the High Court of Calcutta dealt with a case in which a companyplaint had been lodged by one Syambar, accompanied by Gunamony, charging certain persons with murder and other offences. The Police, after investigation, made a report to the effect that the information was false, and thereupon, the Magistrate directed proceedings to be taken against Syambar and Gunamony to show cause why they should number be prosecuted. Syambar, who had made the report, then appeared before the Magistrate, and repeating the information companytained in his report to the Police he asked for an enquiry, which was ordered by the Magistrate. Once again, a report was made by the police that the companyplaint was false. Thereupon, the Magistrate, without putting and end to that companyplaint of Syambar by dismissing it under s. 203, or passing any other order as he might think fit, instituted proceedings against Gunamony under s. 21 1, I.P.C. On these facts, the High Court held that the proceedings against Gunamony must be quashed, because there was numberfinal order by the Magistrate on the companyplaint of Symabar dismissing his companyplaint, and that companyplaint was still pending. On the analogy to this case, it was urged by learned companynsel that in this case also, the proceedings against the appellant should be quashed on the ground that, at the stage when the respondent filed his companyplaint against the appellant, the proceedings being taken by Police on the report of the appellant had number companye to an end. We do number think that the two cases can be companypared. In that case, the proceedings were in Court and the Court filed a companyplaint for bringing false charge or institution of false criminal proceedings without putting an end to those proceedings. In the case before us, there were numberproceedings before any Court on the, basis of the report lodged by the appellant at the time when the respondent filed his companyplaint. It was number at all necessary that the proceedings being taken by the Police should terminate before the Court companyld companypetently take companynizance of this companyplaint filed by the respondent against the appellant. 1 1898-99 3 C.W.N. 758. In K.Ramaswami Iyengar v. K. V. Panduranga Mudaliar 1 , a learned Judge of the Madras High Court, dealing with the principle underlying s. 195, Cr. P.C. held where an act amounts to the offence of companytempt of the lawful authority of public servants ss. 172-188, I.P.C. , or to an offence against public justice such as giving false evidence s. 193, et seq., I.P.C. , or to an offence relating to documents actually used in a Court s. 471 etc. , private prosecutions are barred absolutely, and only the Court, in relation to which the offence was companymitted, may initiate proceedings. This salutary rule of law is founded on companymonsense. The dignity and prestige of companyrts of law must be upheld by their presiding officers, and it would never do to leave it to parties aggrieved to achieve in one prosecution gratification of personal revenge and vindication of a Courts honour and prestige. To allow this would be to sacrifice deliberately the dispassionate and impartial calm of tribunals and to allow a Courts prestige to be the sport of personal passions. We are unable to interpret these views expressed by the Madras High Court as implying that private prosecutions for the offences mentioned in clauses b c of sub-s. 1 of s. 195, Cr. C., are barred absolutely and tinder numbercircumstances can such offences be brought before companyrts by private persons. In the case of cl. b , there is the clear limitation that private prosecutions are barred only if the offence mentioned in that section was alleged to have been companymitted in, or in relation to, any proceeding in any Court. If the offence was number companymitted in, or in relation to, any proceeding in any Court, a private companyplaint is clearly permissible. The question of upholding the dignity and prestige of companyrts of law only arises after there are proceedings in the Courts and number at the stage when numbersuch proceedings have been instituted or have companye into existence in any Court. In the present case, we have already indicated that the companynizance of the companyplaint filed by the respondent against the appellant was taken at a stage when there was numberproceeding in any Court of law, and companysequently, at that stage, there companyld be numberquestion of dignity or prestige of a companyrt of law being upheld or of a private companyplaint being barred. In Emperor v. Hardwar Pal 2 , the companyplaint in question was held to clearly companystitute an offence under s. 182, I.P.C., but the High Court accepted the view held in earlier cases that the facts in the companyplaint also companystituted an offence under the first part of s. 21 1, I.P.C. The High Court was called upon to, decide whether in those circumstances companynizance of the companyplaint for the offence under s. 182, P.C., on the companyplaint of the Police Officer companycerned companyld be companypetently taken when the case related to false information report made to the police on the basis of which a case was sent up to Court and was tried by a Magistrate. The Court held that the companyplaint under s. 182, I.P.C., companyld number be proceeded with, A.I.R. 1938 Mad. 173. I.L.R. 34 All. 522. because, on the basis of the alleged false report, the Police made an inquiry and sent up some accused for trial, and the offence, which had been companymitted under the first paragraph of s. 211 by falsely implicating an accused in the report, was one companymitted in relation to a proceeding in companyrt. It was held to be obvious that there was companysiderable relation between the first report and the proceeding in Court, for the latter was the result of the former. The report led to the police inquiry and the inquiry to the proceeding in companyrt. Consequently, the offence companymitted was one under s. 211 in relation to a proceeding in companyrt and sanction of the Court was necessary. This case, again, does number, therefore, indicate that any view was taken companytrary to our opinion expressed above. Two other cases brought to our numberice are A. T. Krishna- machari v. Emperor, 1 and Badri v. State 2 . In the former case a statement was recorded under s. 164, Cr. P.C. by a Magistrate in relation to a case which was subsequently tried on that matter. Even though the Court, which tried the case, had number recorded the statement under s. 164, it was held that it was companypetent for that Court, on an application under s. 476, to make a companyplaint against the person in respect of a statement made by him to another Magistrate under s. 164, Cr. P.C. This was again a case where the statement under s. 164, Cr. P.C., was found to relate to a proceeding that subsequently came into existence in a Court, and the question of filing the companyplaint for the offence of making that false statement or of taking companynizance in respect of that offence only arose after that proceeding in Court had already companye into existence. In the case of Badri v. State 2 , where an offence under s. 21 1, I.P.C., was alleged to have been companymitted by the person making a false report against the companyplainant and others to the Police, it was held that it was an offence in relation to the remand proceeding and the bail proceedings which were subsequently taken before a Magistrate in companynection with that report to the Police, and, therefore, the case was governed by s. 195 1 b , Cr. P.C., and numbercognizance of the offence companyld be taken except on a companyplaint by the Magistrate who held the remand and bail proceedings. We do number companysider it necessary to express any opinion whether the remand and bail proceedings before the Magistrate companyld be held to be proceedings in a Court, number need we companysider the question whether the charge of making of the false report companyld be rightly held to be in relation to those proceedings. That aspect need number detain us, because, in the case before us, the facts are different. The companyplaint for the offence under s. 21 1, I.P.C. was taken companynizance of by the Judicial Magistrate at Chandigarh at a stage when there had been numberproceedings for arrest, remand or bail of the respondent and the case was still entirely in the hands of the Police. A.I.R. 1933 Mad.767. I.L.R. 1963 2 All. 359. There was, in fact, numberorder by any Magistrate in the proceedings being taken by the Police on the report lodged by the appellant up to the stage when the question of applying the provisions of s. 195 1 b , Cr. P.C., arose. These two cases are also, therefore, of numberassistance to the appellant. On the same ground, the decision of the Bombay High Court in J. D. Boywalla v. Sorab Rustomji Engineer 1 is also inapplicable, because in that case also orders were passed by a Magistrate on the final report made by the Police after investigation of the facts in the report in respect of which the companyplaint under s. 21 1, I.P.C., was sought to be filed. In support of his proposition that numbercriminal companyplaint under s. 21 1, I.P.C., can be filed by a private person if the First Information Report is under investigation and relates to a companynizable offence, Mr. Anthony urged that we should examine the scheme of the Code of Criminal Procedure relating to investigation companytained in ss. 154 to 173 of that Code and should hold that this scheme itself envisages that, invariably, the proceedings of investigation will terminate in a judicial order by a Magistrate, and while such proceedings are pending, it should number be permissible for a private person to file the companyplaint on the ground that the report under investigation was a false one. It is perfectly companyrect that when a report of a companynizable offence is made, a duty is cast on the Police Officer in charge of the station to investigate that case, and in certain cases of serious offences, immediate report has to be sent to the Magistrate who has power to take companynizance of the offences. There is, however, numberhing in these sections to indicate that the Magistrate is required to intervene in the investigation until the investigation is companypleted and the investigating officer arrives at some companyclusion in accordance with s. 169 or s. 170, Cr. P.C. After arriving at this companyclusion under either of those two sections, he has to submit a report to the Magistrate empowered to take companynizance of the offence under s. 173. If his companyclusion is companyered by the provisions of s. 170, Cr. P.C., the report submitted by the investigating officer will necessarily show that a companynizable offence has been company- mitted and such a report will satisfy the requirements of s. 190 1 b , Cr. P.C. On that report, therefore, the Magistrate companycerned can take companynizance and proceed with the trial of the case. On the other hand, if the report is based on companyclusions envisaged in s. 169, Cr. P.C., the report will companytain facts found by the Police Officer, and would numbermally indicate that numbersuch offence was companymitted of which he companyld recommend a trial by the Magistrate. Even on the receipt of such a report, the Magistrate is, of companyrse, companypetent to take companynizance under s. 190 1 b if he is of the opinion that the facts stated in the report of the Police companystitute an offence. On the other hand, if those facts do number companystitute an offence, numbercognizance of the case can be taken by the Magistrate, though he can order further A.I.R. 1941 Bom. 294. investigation. If he does number choose to order further investigation, all that the Magistrate has to do is to make an order under sub-s. 3 of s. 173, Cr. P.C., discharging the bond if the accused has been released by the Police on his bond. This scheme of investigation and its termination companytained in these sections of the Code of Criminal Procedure came up for companysideration in several cases. In Appa Ragho Bhogle and Others v. Emperor 1 it was held that a case which was investigated by the police under authority of a Magistrate under s. 155, Cr. P. C., companyld number be disposed of without the order of the Magistrate in some form or another after a report was submitted to him. In State v. Vipra Khimji Gangaram 2 , it was held that where information relating to the companymission of a companynizable offence is given to an officer in charge of a Police Station under s. 154 Cr. P. C. , and is followed by investigation by him, he is bound under s. 173 1 to forward his final report to a Magistrate empowered to take companynizance of the offence on a police report. This Court also in H. N. Rishbud and Inder Singh v. The State of Delhi 3 , examined the scheme of these provisions of the Code of Criminal Procedure and held that upon the companypletion of investigation, the investigating officer has to submit a report to the Magistrate under s. 173, Cr. P. C., in the prescribed form, furnishing various details, whether it appears to him that there is numbersufficient evidence or reasonable ground, or whether he finds that there is sufficient evidence or reasonable ground to place the accused on trial. Similar observations were made by the Bombay High Court in State and Others v. Murlidhar Govardhan and Others 4 . In two of these cases, viz., .State v. Vipra Khimji Gangaram 2 , and State Ors. Murlidhar Govardhan Ors. 4 the Courts further held that when a Magistrate passes an order on the proceedings under s. 173, Cr. P. C., that order is a judicial order made by him. For purposes of companysidering the effect of these cases in the case before us, it is number at all necessary to express any opinion on the companyrectness of the view that the order passed under s. 173, Cr. P. C., by the Magistrate is a judicial order when he either discharges the bond under sub-s. 3 of s. 173 or takes companynizance under s. 190 1 b , Cr. P.C. Even if it be accepted that the final orders to be made by the Magistrate are judicial orders, the only companyclusion that follows is that at the last stage, on receipt of the report under s. 173, the Magistrate has to act in his judicial capacity. Until that stage is reached, there is numberintervention by the Magistrate in his judicial capacity or as a Court. Consequently, until some occasion arises for a Magistrate to make a judicial order in companynection with an investigation of a companynizable offence by the police, numberquestion can arise of the Magistrate having the power of filing a companyplaint under s. 195 1 b , 1 16 Cr. L. J. 161. 3 1955 I. S.C.R. 1150. A.I.R. 1952 Sau. 67. A.I.R. 1960 Bom. 240. Cr. P. C. In such circumstances, if a private person, aggrieved by the information given to the police, files a companyplaint for companymission of an offence under s. 21 1, 1. P. C., at any stage before a judicial order has been made by a Magistrate, there can be numberquestion, on the date on which companynizance of that companyplaint is taken by the Court, of the provisions of s. 195 1 b being attracted, because, on that date, there would be numberproceeding in any Court in existence in relation to which the offence under s. 21 1, 1. C., can be said to have been companymitted. The mere fact that on a report being made to the police of a companynizable offence, the proceedings must, at some later stage, end in a judicial order by a Magistrate, cannot, therefore, stand in the way of a private companyplaint being filed and of companynizance being taken by the Court on its basis. The last submission made on behalf of the appellant was that a very anomalous position can arise if a private person is allowed to file a companyplaint that the report to the police against him is false before investigation is companypleted. It was urged that there can be cases where a report may be lodged against a person for companymission of a serious offence like murder, and while investigation is still going on, the accused may file a companyplaint against the person, who lodged the report, under s. 21 1, 1. P. C., for making a false report. Subsequently, when the police prosecute that accused, there would, simultaneously, be two trials in one of which the person accused of the murder would be under trial, while in the other case the person, who lodged the First Information Report, would appear as the accused. It was suggested that a person accused of a serious crime should number be given the advantage of putting his companyplainant in jeopardy by instituting a case against him for the offence under s. 21 1, 1. P. C. We are unable to hold that it is necessary to interpret the law in such a way as to necessarily avoid such a situation. There appears to be numberdifficulty in both cases being tried together in the same Court or one after the other by different Courts. In fact, even if we were to accept the submission made on behalf of the appellant, a similar situation can still arise. There may be a case where the police may report to the Magistrate that the First Information Report was false, and in such a case, according to the submissions made by learned companynsel for the appellant, the Magistrate receiving the report under s. 173, Cr. P. C., would be companypetent to file a companyplaint against the informant for the offence under s. 21 1, 1. P. C., in exercise of his power -under s.195 1 b , Cr. P. C. At the same time, there would be numberbar to that informant filing a companyplaint direct in the Court of the Magistrate on the basis of his F. 1. R., so that, again, there can be two trials in the Court in one of which the informant would be the accused, and in the other, the person charged in the First Information Report would be the accused. The situation will number, therefore, differ whether we accept the submission made on behalf of the appellant, or do number do so. This aspect is, therefore, number at all helpful in interpreting the scope of s. 195 1 b , Cr. P. C. We, companysequently, hold that in this case the companyplaint, which was filed by the respondent, was companypetent and the Judicial Magistrate at Chandigarh, in taking companynizance of the offence, only exercised jurisdiction rightly vested in him. He was number barred from taking companynizance of the companyplaint by the provisions of s. 195 1 b , Cr. P. C. In this case, one more point that was canvassed before us was that the two offences under sections 204 and 385, I. P. C., which were included in the companyplaint of the respondent, were so inter-mixed with the offence under s. 21 1, I.P. C., that a trial for those two offences companyld number proceed if the trial for the offence under s. 21 1, I. P. C. was barred by s. 195 1 b , Cr. P. C. That question need number be dealt with by us in view of our decision that companynizance of the offence under s. 21 I,, 1. P. C., has been rightly taken and the trial for that offence is number vitiated. The appeal fails and is dismissed.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 605 of 1964. Appeal by special leave from the judgment and decree dated April 12, 1963 of the Andhra Pradesh High Ccurt in S.A. No. 124 of 1959. Ram Reddy and A. V. V. Nair, for the appellant. R. Gokhale, S. P. R. Vital Rao, K. Rajendra Chaudhari and K. R. Chaudhuri, for the respondent. The Judgment of the Court was delivered by Subba Rao, C.J. This appeal by special leave raises the question whether a suit would lie at the instance of the present trustees of a temple for rendition of accounts of the management of the temple by the ex-trustees. The appellant is Sri Vedagiri Lakshmi Narasimha Swami temple situated at Narasimhuly konda, Nellore taluk, in the State of Andhra Pradesh, represented by its trustees. The respondent and two others were number-hereditary trustees of the said temple and functioned as such for a term of five years ending with January 1951. The respondent was the managing trustee during that period. The new trustees were appointed by order of the Hindu Religious Endowments Board dated January 21, 1951 but they were able to obtain possession of the temple only on July 21, 1952. They, representing the temple, filed O.S. No. 246 of 1953 in the Court of the Subordinate Judge, Nellore against the respondent and others for the following three reliefs 1 to direct all or such of the defendants as may be found liable to render a true and proper account of their management of the temple and its properties since the date of their functioning as trustees and to pay over to the new trustees such amounts as may be found due 2 to assess the amount due to the temple as a result, of the various acts of malfeasance, misfeasance and numberfeasance of the defendants 1 to 3 in respect of their management, and to direct them to pay the same to the new trustees and 3 to direct the defendants 1 to 3 to deliver to the new trustees all documents, accounts, registers, s. 38 register, jewels and movable properties, after rendering a true account thereof and failing such delivery, to pass a decree against the defendants for their value, or pass such decree against them for such damages as the temple had sustained. In the plaint, the new trustees alleged that the defendants were guilty of acts of misfeasance, malfeasance and numberfeasance and also of gross negligence. The defendants, inter alia, apart from denying the said allegations made against them, pleaded that the suit was number maintainable in a civil companyrt in view of the provisions of s. 87 of the Madras Hindu Religious and Charitable Endowments Act, 1951 Act 19 of 1951 , hereinafter called the Act. The learned Subordinate Judge, by his judgment dated August 12, 1953, held that the suit was maintainable. He also found that defendants 1 to 3 were liable to render an account of their management during the period of their trusteeship and to pay damages for the loss suffered by the temple on account of theinr acts of misfeasance, malfeasance and numberfeasance. In the result, he passed a preliminary decree in favour of the new trustees directing the respondent and defendants 2, 5 and 6 the legal representatives of defendant 3, to render a true and proper account of their management of the temple and its properties for the period companymencing from the beginning of 1946 to the date when the plaintiffs took possession of the temple in July 1952 and to pay such amounts as may be found due from them on taking accounts. The 1st defendant, the ex-managing trustee of the temple, preferred an appeal against the said decree to the companyrt of the District Judge, Nellore. To that appeal, the plaintiffs were made respondents. Pending the appeal, the plaint was amended and the words of pass such decree against them for such damages as the temple has sustained thereby were deleted from prayer 3 of the plaint. The learned advocate for the plaintiffs made an endorsement on the plaint and the appeal memo stated as follows Plaintiffs have given up prayer in respect of the damages as endorsed by the learned advocate on behalf of the plaintiffs on the plaint on 20-8-1958. The learned District Judge also recorded in his judgment that the appellant respondent herein did number press his appeal in respect of the claim for damages given up by the plaintiffs. Prima facie this amendment related only to the prayer to deliver to the new trustees the documents and other movable properties and did number affect the other prayers for rendition of accounts on the ground of malfeasance, misfeasance and numberfeasance of the defendants. The learned District Judge understood the finding given by the learned Subordinate Judge as follows Setting out all these things in detail in paras 13 and 14 of his judgment, the learned Subordinate Judge came to the companyclusion that it was sufficient to say that there is liability to account in respect of the management on the part of the ex-trustees, i.e., defendants 1 and 3, and that they are liable to pay to temple whatever damages it has suffered on account of their acts of misfeasance, malfeasance and numberfeasance. After companysidering the relevant evidence and the case law on the subject, he came to the following companyclusion I have numberhesitation to hold that the plaintiffs have established liability for ex- trustees to render account of their management to deliver possession of the other property yet to be delivered and also the records men- tioned in the plaint. The learned District Judge, therefore, agreed with the learned Subordinate Judge that the defendants had to render accounts of their management of the temple and to pay to the temple damages suffered by it on account of their acts of misfeasance, malfeasance and numberfeasance. In the result the decree of the learned Subordinate Judge was companyfirmed. But, on Second Appeal, Jaganmohan Reddy, J., of the Andhra Pradesh High Court, held that the suit for accounts was number maintainable. The reasoning of the learned Judge is found in the following observations It is true that a suit for back accounting on the authority of the decisions cited above does number lie and unfortunately in this case though the frame of the suit was for recovery of damages for negligence of the trustees in number taking leases, in number filing rent suits, in number companylecting rents and generally for other acts of negligence, that plea was given up by the respondents, probably because they were number in a position to establish these facts. The learned advocate for the respondents admits that this plea was given up by the clients and in the circumstances the only relief that the respondents claim against the appellant number is one for general accounting relating to the management or administration of the trust property and applying the principle laid down by the two judgments of this Court in Venkataratnam v. Narasimha Rao 1 and Sri Saraveswaraswami Vari temple v. Veerabhadrayya 2 , 1 cannot but hold that suit will number he and in this view, the appeal is allowed and the judgments and the decrees of the companyrts below are set aside. Though, prima facie, as we have said earlier, we are inclined to hold that what was given up by the appellant was only a part of the third relief, in view of the unambiguous admission made by the learned advocate for the appellant and recorded in the judgment of the High Court, we have numberoption but to hold that the appellant had given up the plea of wilful default against the defendants and companyfined the relief only to a rendition of accounts by them in respect of their management of the temple during their tenure and to pay the amount that might be found due to the appellant. Mr. P. Ram Reddy, learned companynsel for the appellant-temple, raised before us three points 1 The suit was for damages for gross negligence and the learned Judge did number appreciate the companyrect scope of the companycession made by the learned advocate appearing for the temple before him. 2 Section 93 of the Act is number a bar to a suit by the present trustees against the ex-trustees for rendition of accounts of their management of the temple 1 1960 2 Andh. W.R. 319. M15Sup.CI/66-5 2 1961 1 Andh. W.R. 25J. properties and recovery of the amounts due from them. 3 The learned Judge went wrong in holding that a suit for back-accounting would number lie. On the first point we have already expressed our opinion earlier that, in view of the unambiguous companycession made by the learned advocate for the appellant before the High Court, we must hold that the suit, after the amendment of the plaint, was companyfined only to rendition of accounts, number on account of wilful default or negligence, but only for rendition of accounts by the ex-trustees of their management and to pay the amounts due to the present trustees. The question, therefore, is whether the present trustees can demand a rendition of accounts from the ex-trustees in respect of their management without alleging against them any acts of negligence or wilful default and, if so, whether s. 93 of the Act was a bar to the maintainability of a suit for the relief of rendition of accounts in a civil companyrt. It is companymon place that numbertrustee can get a discharge unless he renders accounts of his management. This liability is irrespective of any question of negligence or wilful default. In the present case, the ex-trustees admittedly did number give an account of their management though they put the plaintiffs in possession of the properties in the year 1952 and that too after adopting a companyrse of obstructive attitude. They are, therefore, liable to render accounts of their management to the present trustees. The decisions relied upon by the learned Judge to number sup- port the view that an ex-trustee need number render accounts in the absence of allegations of negligence or wilful default. In V. K. Kelu Achan v. C.S. Sivarama Pattar 1 one of the questions raised was whether the 1st defendant therein, who was a karnavan of a tarwad and also the manager of temple properties, should be made to give a general rendition of accounts of his management from 1900. It was found in that case that the 1st defendant was number personally responsible for any loss to the temple, that numberrelief for rendition of accounts was asked for against him and that he was number the person who was maintaining the accounts. on those facts, the High Court refused to give a decree against the 1st respondent for back-accounting. In the companyrse of the judgment the following observations were made It is a general principle also that back accounting will number be decreed except on proof of dishonesty and malversation, and we have number found any such proof here against the present trustee. These observations do number circumscribe the scope of the companyrts discretion, but only lay down a guide for its exercise. They must A.I.R. 1928 Madras 879, 887. be read in the companytext of the facts found in that case. Nor the decision in The Madura etc. Devasthanams v. Doraiswami Nayudu 1 lays down any such wide proposition. There, the executive officer of a temple sought to recover from its ex- trustee a certain amount by way of damages on foot of gross negligence. It was found that the trustee was number guilty of any wilful default and that he was justified in acting upon the vouchers and accounts furnished by the law department of the Devasthanam and also that it was number established that any items were really due to the temple. On those facts the suit was dismissed. Briefly stated, that was a suit for rendition of account on the ground of wilful default in the companyrse of management of the temple affairs and, as numberwilful default had been established, the suit for accounts was dismissed., It is number an authority for the position that unless wilful default is established an ex-trustee need number account to the present trustee and to pay to him the amount due under the said accounts. In the case of rendition of accounts by an ex-trustee to a present trustee, it will necessarily relate to back accounting, for numberquestion of accounting in future arises in his case. The question that invariably arises in such a companytext is as to what period he shall be made liable to render accounts. That depends upon the facts of each case. Sir Thomas Flumer, M. R., said in Attorney General v. Exetor Mayor 2 It has, I think, been properly stated on both sides, that there is numberfixed limit of time in directing an account against a trustee of a charity, It does number, however, follow that the relief will be given after a great length of time, it being the companystant companyrse of Courts of Equity to discourage stale demands even in cases of fraud, in which, if recent, there would have been numberdoubt, lapse of time has induced the Courts to refuse their interference. In cases of charities, this principle has often been acted on. When there has been a long period, during which a party has, under an innocent mistake, misapplied, a fund, from the leaches and neglect of others, that is, from numberone of the public setting him right, and when the accounts have in companysequence become entangled, the Court, under its general discretion, companysidering the enormous expense of the enquiries, the great hardships of calling upon representatives to refund what families have spent, acting on the numberion of its being their property, has been in the habit, while giving the relief, of fixing a period to the account. These observations were followed by a Division Bench of the- Madras High Court in Sanyasayya v. Murthamma 3 . Where 1 1943 1 M.L.J. 144. 2 1822 37 E.R. 918. A.I.R. 1919 Madras 943. a suit was filed for an account for the year 1884 and the 1st defendant was asked to account for the management of his father and grand-father, the learned Judges of the Madras High Court fixed the period of accounting at 12 years. The said observations were also followed by the Andhra High Court in Hariharabrahmam v. Janakiramiah 1 and, having regard to the circumstances in that case, the said High Court directed accounts to be taken for a period of six years prior to 1938. In the present case the learned subordinate Judge and the learned District Judge, in exercise of their discretion, having regard to the circumstances of the case, directed the respondent to render accounts of his management from the beginning of the year 1946 to the date when then plaintiffs took possession of the temple in July 1952. We do number see any justification to interfere with the discretion of the companyrts in that regard. The next question is whether s. 93 of the Act is a bar to the maintainability of the suit. The said section reads No suit or other legal proceeding in respect of the administration or management of a religious institution or any other matter or dispute for determining or deciding which provision is made in this Act shall be instituted in any Court of law, except under, and in companyformity with, the provisions of this Act. The learned companynsel for the appellant companytended that in order to invoke this section the following companyditions shall be companyplied with 1 The suit shall be in respect of the administration or management of a religious institution 2 it shall be in respect of any other matter in dispute and 3 for determining or deciding such a suit or other legal proceeding there shall be a provision in the Act if there is such a provision, such a suit or proceeding companyld number be instituted in any companyrt of law except under, and in companyformity with, the provisions of the Act. The further argument was that the administration or management referred to in s. 93 related to s. 58 of the Act, and the other matters of dispute related to s. 57 thereof, and that, as the suit for rendition of accounts did number fall either under s. 57 or under s. 58 of the Act, the present suit for such a relief was outside the scope of s. 93 of the Act. Mr. Gokhale, learned companynsel for the respondent, companytended that Ch. VII of the Act provided for rendition of accounts and a machinery for determining or deciding disputes in respect thereof, and that, therefore, numbersuit or other legal proceeding companyld be taken in any companyrt except under and in companyformity with the provisions of that Chapter. A.I.R. 1955 Andhra 18. Under s. 9 of the Code of Civil Procedure, the companyrts shall have jurisdiction to try all suits of a civil nature excepting suits of which their companynizance is either expressly or impliedly barred. It is a well settled principle that a party seeking to oust the jurisdiction of an ordinary civil companyrt shall establish the right to do so. Section 93 of the Act does number impose a total bar on the maintainability of a suit in a civil companyrt. It states that a suit of the nature mentioned therein can be instituted only in companyformity with the provisions of the Act that is to say, a suit or other legal proceeding in respect of matters number companyered by the section can be instituted in the ordinary way. It therefore imposes certain statutory res- trictions on suits or other legal proceedings relating to matters mentioned therein. Now, what are those matters ? They are 1 administration or management of religious institutions and 2 any other matter or dispute for determining or deciding which provision, is made in the Act. The clause determining or deciding which a provision is made in this Act, on a reasonable companystruction, cannot be made to qualify the administration or management but must be companyfined only to any other matter or dispute. Even so, the expression administration or management cannot be companystrued widely so as to take in any matter however remotely companynected with the administration or management. The limitation on the said words is found in the phrase except under and in companyformity with the provisions of this Act. To state it differently, the said phrase does number impose a total bar on a suit in a civil companyrt but only imposes a restriction on suits or other legal proceedings in respect of matters for which a provision is made in the Act. Any other companystruction would lead to an incongruity, namely, there will be a vacuum in many areas number companyered by the Act and the general remedies would be displaced without replacing them by new remedies. The history of this provision also supports the said interpretation. Sub-section 2 of s. 92 of the Code of Civil Procedure says Save as provided by the Religious Endowments Act, 1863, numbersuit claiming any of the reliefs specified in subsection 1 shall be instituted in respect of any such trust as is therein referred to except in companyformity with the provisions of that sub-section. Suits for reliefs mentioned in sub-s. 1 of s. 92 of the Code of Civil Procedure can only be instituted in special companyrts and in the manner mentioned therein. Construing the said sub-section, a Full Bench of the Madras High Court in Appanna v. Narasinga 1 held that a suit by a trustee of a public religious trust against a companytrustee for accounts did number fall within the section, though the relief claimed 1 1922 I.L.R. 45 Madras 113. was the one specified in sub-s. 1 , cl. d . The reason given was that the relief was sought number in the larger interest of the public but merely for the purpose of vindicating the private rights of one ,of the trustees and of enabling him to discharge the duties and liabilities which were imposed upon him by the trust. Another Full Bench of the Madras High Court in Tirumalai Tirupati Devasthanam ,Committee v. Udiavar Krishnayya Sahnbhaga 1 held that the ,said section did number apply where the general trustees of a public temple sued the trustees of certain offerings given to the deity, for accounts, on the ground that in that suit the right of the public was number sought to be enforced but only the personal rights of the trustees qua the trustees. These decisions indicate that s. 92 of the Code of Civil Procedure does number impose a general embargo on filing of a suit in a civil companyrt, but only directs that suits of the nature mentioned in sub-s. 1 thereof shall number be instituted in a civil companyrt except in companyformity with the provisions of the said sub-section. If a suit does number fall within the ambit of s. 92 1 of the Code of Civil Pro- cedure, it is number hit also by sub-s. 2 thereof. When the Madras Hindu Religious Endowments Act 2 of 1927 was passed, in respect of the endowments companyered by that Act, s. 73 of that Act replaced s. 92 of the Code of Civil Procedure. Sub-section 4 ,thereof, which was added by Madras Act X of 1946 read No suit or other legal proceeding claiming any relief provided in this Act in respect of such administration or management shall be instituted except under and in companyformity with the provisions of this Act. The expression except under and in companyformity with the provisions of this Act in the said sub-section is also found in s. 93 of the Act. The scope of the said sub- section came under judicial scrutiny in Manjeshwar Srimad Anantheswar Temple v. Vaikunta Bhakta 2 Therein Horwill, J., summarised the legal position reached in respect of the companystruction of that section thus It will be seen therefore that from 54 Mad. 1011 Vythilinga Pandarasannadhi v. Temple Committee, Tinnevelly onwards there was a companysiderable body of opinion that the general scope of s. 73, Hindu Religious Endowments Act, is the same as s. 92, Civil P.C., that the last paragraph of s-. 73 of the Act is meant to refer only to the classes of cases referred to in s. 73 1 and other sections of the Act, and that suits which do number fall within the scope of these sections can be tried under the general law. I have number companye across any case in which these opinions were dissented from or companytrary opinions expressed, A.I.R. 1943 Madras 466. A.I.R. 1943 Madras 228, 230. Sub-section 4 , which companyresponds to s. 93 of the Act, was held number to impose a total bar on a civil suit but only companyfined to suits relating to the classes of cases referred to in s. 73 1 and other sections of the Act. Section 93 of the Act enlarges the scope of s. 73 4 thereof It bars number only suits or legal proceedings in respect of administration or management of religious institutions but also in respect of any other matter or dispute for determining or deciding which provision is made in the Act. By repeating the phrase except under and in companyformity with the provisions of the Act which had received authoritative judicial interpretation when it remained in s. 73 4 of the earlier Act, the Legislature must be held to have accepted the interpretation put upon the phrase by the companyrts. It follows that s. 93 will apply only to matters for which provision has been made in the Act. It does number bar suits under the general law which do number fall within the scope of any section of the Act. Even so, the learned companynsel for the respondent companytended that Ch. VII of the Act provided a companyplete machinery for deciding disputes in regard to accounts and, therefore, numbersuit for accounting against an ex-trustee companyld be filed in a civil companyrt. This interpretation was accepted by two decisions of the Andhra Pradesh High Court. The decision in Venkataratnam v. Narasimha Rao 1 dealt with a case of a suit filed with the permission of the Advocate General for removing the trustee, for framing a scheme for the management of the trust property, for appointing a new trustee and for accounts and other incidental reliefs. The companytesting defendant pleaded inter alia that because of the provisions of the Madras Act 19 of 1951, the suit companyld number be entertained by the civil companyrt, and that s. 93 was a bar to such a suit. The Andhra Pradesh High Court held that s. 93 of the Act clearly interdicted the determination of the subject matter of the suit by a civil companyrt. The reasoning of the decision is summarized thus Now the suit is entirely based on allegations of breach of trust and every one of the reliefs prayed for in the plaint can flow from appropriate action that officers named in the Act may take. The first relief sought in the present plaint can result from action taken under section 45 of the Act the second and third reliefs from action under section 58 the fourth from action under section 60 the 6th relief from action under section 57 and the relief numbered and lettered as 6 a from action under section 87. The High Court also observed In our opinion, all these are matters or disputes for determining or deciding which provision is made in the Act. 1 1960 2 Andh. W.R. 319, 323. On that basis it held that s. 93 of the Act was a bar to the maintainability of the suit. It may be mentioned that the observation that the fourth relief companyld result from action under s. 60 appears to be a mistake, for s. 60 applies only to a defunct religious insti- tution. In Sri Sarveswaraswami Vari Temple v. Rudrapaka Veerabhadrayya 1 Seshachelapati, J., speaking for the companyrt, said thus It will be seen, as companyrectly observed by the learned Subordinate Judge, that the section has two limbs. The first limb interdicts suits or other legal proceedings with respect to the administration or management of the re- ligious institution. The second limb enacts an embargo on suits and legal proceedings on any other matter in dispute for the determination of which a provision had been made in this Act. There, the suit was by the present trustees for the recovery of the temple properties from the hereditary archakas. The High Court held that such a suit was number one in respect of the administration or management of the temple and, therefore, it did number attract the embargo entered in the first limb of the section. This decision, therefore, held that unless the suit fell within the classes of suits mentioned in s. 93 of the Act, the provisions of the section were number attracted. It leads us to the companysideration of the scope of Chapter VII of the Act. If Chapter VII of the Act provides for determining or deciding a dispute in respect of rendition of accounts, s. 93 of the Act would be attracted. The heading of the said Chapter is Budgets, Accounts and Audit. Section 70 provides for the presentation of budgets and the particulars to be mentioned therein. Section 71 enjoins upon a trustee of every institution to keep regular accounts of receipts and disbursements. Section 71 4 prescribes for an audit of the accounts every year. Section 72 directs the auditor to send a report of the results of the audit to the prescribed authorities. Section 73 enumerates the matters in respect of which the auditor has to send his report. Section 74 directs the prescribed authorities to send the said report to the trustees for remedying the defects pointed out therein. The Area Committee, one of the prescribed authorities under s. 74 2 of the Act, has to forward to the Commissioner the report of the auditor along with the report of the trustees, if any, and with his remarks. If the Commissioner thinks that the trustee or any other person is guilty of misappropriation or wilful waste of funds of the ninstitu- 1 1961 1 Andh. W.R. 250, 251. tion or of gross neglect resulting in a loss to the institution, after making the requisite inquiry, certify the amount so lost and direct the trustee or such person to pay within a specified time such amount personally and number from the funds of the religious institution. On the receipt of such an order, the trustee can apply to a companyrt to modify or set aside the same. Instead of filing an application to the Court, he has an alternative remedy to file an appeal to the Government which shall pass such order as it thinks fit. Under sub-s. 7 of s. 74, an order of surcharge under the section against a trustee shall number bar a suit for accounts against him except in respect of the matter finally dealt with by such order. Sub-section 8 thereof provides a machinery for companylecting the said amounts from the trustee or other person by way of surcharge. Relying upon the scheme of this Chapter, it is companytended that it provides an exhaustive and self-contained machinery for scrutinizing the accounts, for orders of surcharge and to recover the amount surcharged from the trustee or other persons and for a suit to set aside such orders or alternatively for an appeal to the Government and that, therefore, numbersuit for rendition of accounts would lie dehors the provisions of the Act. We find it difficult to accept this argument. Chapter VII only provides for a strict supervision of the financial side of the administration of an institution. The scope of the auditors investigation is limited. It is only an effective substitute for the trustee himself furnishing an audited account. It is companycerned only with the current management of a trustee. It does number even exonerate a trustee of his liability to render accounts except to a limited extent mentioned in sub-s. 7 of s. 74 it only facilitates the rendition of accounts. Under sub-s. 7 of s. 74, an order of surcharge under that section against a trustee shall number bar a suit against him except in matters finally dealt with in such order. This shows by necessary implication that a suit can be filed for accounts against a trustee in other respects. In any view, it has numberhing to do with the management of a temple by a previous trustee. It is company- tended that under sub-s. 5 of s. 74 the trustee or any other person aggrieved by such order may file a suit in the civil companyrt or prefer an appeal to the Government questioning the order of the Commissioner and, therefore, it is open to any member of the public to file a suit under the Act. Any person there only refers to a person mentioned in sub-s. 3 of s. 74, i.e., a person who is guilty of misappropriation or wilful waste of the funds of the institution etc. It obviously refers to a trustee or some other person in management of the institution who is guilty of misappropriation. We, therefore, hold that Chapter VII of the Act has numberbearing on the question of liability of an ex-trustee to render account to the present trustee of his management. Chapter VII does number provide for determining or deciding a dispute in respect of such rendition of accounts. If so, it follows that s. 93 of the Act is number a bar to the maintainability of such a suit. In the result, we set aside the decree of the High Court and restore that of the learned Subordinate Judge. The respondent will pay the companyts of the appellant throughout.

Case appeal was accepted by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 945 of 1965. Appeal by special leave from the judgment and order dated December 14, 1962 of the Gujarat High Court in Sales Tax Re- ference No. 16 of 1961. S. Bindra and R. H. Dhebar, for the appellant. V. Goswami, for the respondent. The Judgment of the Court was delivered by Bhargava, J. This appeal under special leave granted by this Court arises out of proceedings for assessment of sales-tax under the Bombay Sales Tax Act III of 1953. Messrs. Kailash Engineering Co. hereinafter referred to as the respondent was an engineering companycern having their workshop at Morvi on the meter gauge section of the Western Railway. They obtained a companytract from the Western Railway Administration for companystruction of III class passenger companyches on certain companyditions described as the companyditions of tender. Under that companytract which was reduced to writing and was described as an agreement, the respondent companystructed three companyches and submitted a bill which was properly certified in accordance with the agreement by the Railway Administration on October 4, 1958. The net value of the work done by the respondent was certified at Rs. 1,22,035/-. After receipt of this money, the respondent wrote to the Additional Collector of Sales Tax requesting him under S. 27 of the Bombay Sales Tax Act, 1953, to hold that this was a works companytract, and that the transaction, in respect of which the respondent received the money, did number amount to a sale, so that numbersales-tax was payable under that Act. The Additional Collector held that two questions fell for determination before him Whether the transaction companyered by the bill dated 4th October, 1958, is a sale and 2 if it is a sale, whether any tax is payable in respect of the same. The Additional Collector answered both the questions in the affirmative against the respondent. The appeal before the Gujarat Sales Tax Tribunal failed and thereupon, the respondent sought a reference to the High Court of Gujarat. The Tribunal referred the following question for the opinion of the High Court- Whether on a proper companystruction of the agreement as a whole and its general companyditions and specification, the work done and companyered by Contract Certificates No. M/60 1 B-PRTN, dated 4th October, 1958, for the perfor- mance of the works of building, erecting and furnishing 3 B. G. Coaches over the chassis supplied by the Railway is a works companytract number amounting to sale, or whether it is a transaction of sale. The High Court answered the question in favour of the respondent, holding that the transaction was a works companytract carried out by the respondent and did number amount to a sale. Consequently, this appeal has been brought up by the State of Gujarat challenging the companyrectness of the decision of the High Court. The Tribunal, when dealing with the case, mentioned a few of the terms of the companytract entered into between the respondent and the Western Railway Administration, and, though there was a provision in one of the clauses of the agreement that as soon as the plant and materials were brought on the site where the companyches were to be companystructed, the ownership in them would vest in the Railway, the Tribunal held that the ownership in those materials never passed to the Railway because of the indication given by another clause which provided that on removal of companytractor or on rescission of companytract, the Railway Authorities would be entitled to take possession and retain all materials, tools, implements, machinery and buildings. On this basis, the Tribunal held that, from the general companyditions of the companytract, it appeared that the ownership of the companych bodies only passed to the Railway when companypleted and handed over to the Railway, so that the companytract was for supply of companych bodies. It was on supply of these companych bodies that the respondent received the price of those bodies, and thus received the amount subjected to sales-tax as sale companysideration for those bodies. The High Court, however, in its judgment, reproduced the preamble of the companytract as well as a large number of clauses of it to show that in the companytract, at every stage, it was clearly mentioned that the companytract was for performance of work of building, erecting and furnishing companych bodies on Broad Gauge underframes which already belonged to the Railway. The terms of the companytract showed that as soon as the materials were taken by the respondent to the site of companystruction of the companyches, the ownership in those materials vested in the Railway and all that the respondent had to do was to carry out the work of erecting and furnishing the companych bodies. When the companych bodies were ready, the property in them vested in the Railway automatically without any further transfer of rights in it to the Railway. In fact, the ownership in the ready companych bodies did number vest in the respondent at all. No doubt, the materials for building the companych bodies had to be obtained by the respondent and brought to the site of companystruction, but the provision that the ownership in those materials would vest in the Railway as soon as those materials were brought to the site clearly indicated that the respondent, in purchasing those materials, was acting more or less in the capacity of an agent for the Railway. While the materials were at site, the effect of vesting of their ownership in the Railway was that if they were destroyed or damaged, the risk had to be borne by the Railway, even though the Railway might have been entitled to reimburse itself, because those materials -and goods were in the custody of the respondent on behalf of the Railway. In fact, under clause 29, there was a specific provision for the companytingency that the materials or plant may be lost, stolen, injured or destroyed by fire, tempest or otherwise. This special provision was to the effect that the liability of the companytractor was number to be diminished in any way, number was the Railway to be in any way answerable for loss or damage on the happening of such companytingency. This special provision had to be made, because the ownership in the materials vested in the Railway, though the companytractor was in actual physical possession of the materials and plant in order to carry out the works companytract. It was for this reason that a specific provision had to be made that the companytractor would be liable to the Railway if any such loss occurred. Taking into account all the terms of the companytract as a whole, the High Court came to the finding that the companytract between the parties was one entire and indivisible companytract for carrying out the works specified in full details in the agreement, and that it did number envisage either the sale of materials by the respondent to the Railway, or of the companych bodies as such. In this companynection, learned companynsel for the appellant relied on the decision of this Court in Patnaik Company v. State of Orissa. 1 In that particular case, the companytract in question was for the supply of bus bodies, and it was held that when the bus bodies were supplied by the companytractor and money received by him, it amounted to a sale. It, however, appears that the facts and circumstances, on the basis of which the Court gave that opinion, do number find place in the case, Three main circumstances were relied upon in that case for holding that the transaction amounted to a sale and number to a works companytract. The first circumstance was that the bus bodies were, throughout the companytract, spoken of as a unit or as a companyposite thing to be put on the chassis, and this companyposite body companysisted number only of things actually fixed on the chassis but movable things like seat cushions, and other things which companyld be very easily detached. In the companytract, with which we are companycerned, the companych bodies are number separately described as units or companyponents to be supplied by the respondent to the Railway. The language used in the companytract everywhere describes the duty of the respondent to be that of companystructing, erecting and furnishing companych bodies on the underframes supplied. At numberstage does the companytract mention that ready companych 1 1965 2 S.C.R. 782. bodies were to be delivered by the respondent to the Railway. In fact, even during the process of companystruction of the companych bodies, the unfinished bodies in process of erection were treated, under the terms of the companytract, as the property of the Railway. The second circumstance found in that case was that if some work was number satisfactorily done and the body builder, on receipt of a written order, did number dismantle or replace the defective work or material at his own companyt within seven days, the Controller was entitled to get the balance of the work done by another agency and recover the difference in companyt from the body builder and for this, purpose, the Controller was entitled to take delivery of the unfinished body. In the companytract before us, as we have already mentioned in the preceding paragraph, the unfinished bodies of the companyches were from the earliest stage treated as the property of the Railway, and there was numberquestion of ownership of the unfinished body passing to the Railway only after its seizure by it as was the case in the other companytract in which the property in the unfinished body did. number pass to the Government till the unfinished body was seized. The third circumstance taken into account in that case was the liability for the loss, if a fire took place and the bus bodies were destroyed or spoiled. In that case, there was a provision for insurance of the chassis, but there was numbersuch provision regarding. insurance of bus bodies, and the Court inferred that till delivery was made, the bus bodies remained the property of the appellant on whom the loss would fall. On the other hand, in the companytract with which we are companycerned, the terms envisaged the property in the unfinished bodies vesting in the Railway, and since those unfinished bodies were to be in charge of the respondent during companystruction, a special provision had to be made making the respondent responsible for the loss and throwing upon the respondent the liability to reimburse the Railway for loss by fire, etc. Thus, the terms of the companytract in this case are markedly different from those which came up for companysideration in that case. Here, we find that all the terms of the companytract lead to the only inference that the respondent was number to be the owner of the ready companych bodies and that the property in those bodies vested in the Railway even during the process of companystruction. This was, therefore, clearly a works companytract which did number involve any sale. The decision given by the High Court was companyrect. The appeal fails and is dismissed with companyts.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 714-724 of 1965. Appeals by special leave from the judgment and order dated January 29, 1962 of the Mysore High Court in-Civil Revision Petitions Nos. 1169 to 1176 of 1958 and 841, 842 and 865 of 1959 respectively. Ganapathy Iyer and R. N. Sachthey, for the appellant in .all the appeals . Gopalakrishan, for the respondents in all the appeals . The Judgment of the Court was delivered by Bhargava, J. These appeals arise out of proceedings for assessment of sales-tax under the Madras General Sales Tax Act No. IX of 1939 hereinafter referred to as the Act in respect of certain sales of companyton. The respondents were registered dealers in companyton, including kappas, groundnuts and companyton seeds with their Head Office at Bellary and Branch Offices at a number of places. They were also licensees under s. 8 of the Act in respect of companyton. They made various purchases of companyton at their places of business and subsequently sold them to different parties. Amongst these were a number of persons who were number resident within the area to which the Act applied. The question arose as to who was liable to pay the sales-tax in respect of those transactions of sale of companyton in which the companyton had been sold by the respondents to number-residents. When the case came up before the Mysore Sales Tax Appellate Tribunal, the Tribunal determined the companyrse of transactions and held as follows The examination of the companytracts, the invoices, the railway receipts, insurance policies and other documents relating to the disputed turnovers shows that the numberresident foreigners place orders for the required number of bales of companyton specifying the quality and the rate some times on phone which would be companyfirmed subsequently by Telegrams or letters and finally by written agreements. Thereupon, the appellants companysign the companyton bales in their own name, the companysignee being the numberresident foreign buyers except in respect of a total turnover of Rs. 2,93,567-2-0 which would companyer the items 1, 3, 5, 7, 31, 32, 33 and 44 of the typed statement of the account for the year 1954-55 and a total turnover of Rs. 3,71,880-13-0 which would companyer the items 6, 10, 11, 12, 13, 14, 15, 16, 24, 25, 26, 29, 30, 31, 35, 36 and 37 of the typed statement of account for the year 1955- 56 and send the railway receipts to their bankers at the other end for the companylection of the amount. It is seen that numberwithstanding the fact that there are specific provisions in the companytract that 90 per cent of the invoice amounts should be paid to the bankers when the railway receipts would be delivered to the purchasers, surprisingly the said provision is rendered nugatory by reason of the fact that the appellants despatch the companyton in such a way that the companysignee companyld get companyton bales at the other end even though without any payment to the banker. The moment the appellants companysigned the goods, they will have lost companyplete companytrol and dominion over the companyton thus despatched. Further, number-resident foreign buyers who obtained the necessary transport permit under the Cotton Control Order, 1950, actually insure the companyton bales as the owners thereof and transmit the same from Bellary to the destination. This is so even in cases where the appellants themselves have companysigned the goods in their own name, the companysignees being themselves. All these facts clearly go to show that the sales are companypleted at Bellary and the number-resident foreign buyers in whose favour the property in the goods had been transferred actually transported the companyton thus purchased. The State Representative does number seriously dispute about the companyrectness of the modus operandi of the appellants in their dealings with their purchasers during five years of assessments. Bearing these facts in mind, we shall number proceed to examine each of the companytentions raised by the learned companynsel. On these facts, the question that fell for determination was whether for purposes of s. 5 2 of the Act read with Rule 4- A iv b of the Madras General Sales Tax Turnover and Assessment Rules, 1939 hereinafter referred to as the Rules , the respondents were the dealers who bought the companyton in the State and were the last dealers number exempt from taxation under s. 3 3 of the Act on the amount for which the companyton was bought by them. The companytention on behalf of the respondents was that the companyton was sold by them within the State of Madras to parties who were residing outside the State of Madras but the sales having been made by them within the State of Madras, they companyld number be held to be dealers who bought the companyton in the State and were the last dealers for that purpose number exempt from taxation. According to their companytention, the parties, to whom they sold the companyton within the State, were the persons liable to be taxed in accordance with s. 5 2 of the Act and Rule 4- A iv b of the Rules. The Tribunal accepted this plea of the respondents, allowed the appeals, and set aside the orders of the subordinate authorities directing payment of sales-tax by the respondents. That order was upheld by the High Court of Mysore when the revisions against the orders of the Tribunal came up for decision before it. These appeals before us companying up by special leave are directed against the above order of the High Court. We may mention that the revisions came up before the High Court of Mysore, because the area, in respect of which the dispute arose, was originally within the State of Madras, but, on Reorganisation of States, came within the State of Mysore. The law applicable to sales in the year in question, however, companytinued to be the Madras Sales Tax Act IX of 1939, and that area came to be designated as Madras Area of the State of Mysore. In these appeals, two points were canvassed before us by learned companynsel for the State of Mysore. At the initial stage, learned companynsel for the State indicated that he did number intend to challenge the finding that the situs of the sales in question were all within the Madras area but at a later stage, he challenged this finding as the second alternative point in support of these appeals. We may deal with this point first. The companyrse of transactions found by the Tribunal, reproduced above, led the Tribunal and the High Court to the finding that the situs of the sales by the respondents to the number- resident parties was in Bellary where the sales were companypleted and delivery also took place. The submission by learned companynsel for the appellant was that numbere of those parties themselves came within the State to Bellary either for the purpose of entering into companytracts for sale, or for purposes of taking delivery. Delivery was given to companymon carrier, and companysequently, it should be held that the sales were companypleted number within the State, but outside at the places to which the goods were companysigned for delivery to the various parties. We are unable to accept this submission. It has been rightly held by the High Court that the companymon carrier took delivery as agent of the buyer and that delivery was within the State. There is the further circumstance that, during transit, the goods were insured by the buyers at their own companyt, and number by the respondents. The buyers thus recognised that they were already the owners of the companyton bales as soon as they were given for transmission to the companymon carrier. In this companynection, a question also arose whether the sales by the respondents to those number-resident parties were sales in the companyrse of inter-State trade. What are the sales in the companyrse of inter-State trade was explained by this Court in Tata Iron and Steel Co. Limited, Bombay v. S. R. Sarkar and Others 1 , where clauses a b of s. 3 of the Central Sales Tax Act, 1956 were interpreted as follows In our view, therefore, within cl. b of s. 3 are included sales in which property in the goods passes during the movement of the goods from one State to another by transfer of documents of title thereto cl. a of s. 3 companyers sales, other than those included in cl. b , in which the movement of goods from one State to another is the result of a companyenant or incident of the companytract of sale, and property in the goods passes in either State. 1 1961 1 S.C.R. 379. The nature of transactions found by the Tribunal in the cases before us shows that property in the companyton bales sold by the respondents did number pass during the movement of goods from one State to another by transfer of documents of title, and, further, that the movement of goods from the Madras area to places outside the State was number the result of any companyenant or incident of the companytract of sale. The companytract of sale was companypletely carried through within the Madras area itself, in which area the price was received by the respondents and the companyton bales were delivered to the buyers. The movement of the companyton bales outside the State was by the buyers themselves after property in them had passed to them, so that these sales were number sales in the companyrse of inter-State trade. We number companye to the second and the main point which was urged before us by learned companynsel for the appellant. The sub- mission of learned companynsel was that a buyer, who was number resident within the area to which the Act applied, companyld number be held to be the last dealer for purposes of Rule - 4- A iv b of the Rules. According to him, it is the situs of the seller and the buyer which determines the applicability of this Rule, and number the situs of the sale of companyton itself. We are unable to accept this submission. The language of the Rule is clear that the tax is to be levied from the dealer who buys it in the State and is the last dealer number exempt from taxation. The test laid down thus is as to who buys it in the State and number who is in the State for purposes of buying the companyton. The Mills outside the State were numberdoubt carrying on their main business of manufacture of yarn or cloth outside the State but so far as the act of purchase of these companyton bales was companycerned, it was carried out by them within the State. It is to be numbericed that in the Rule the expression used is the dealer who buys it in the State and is the last dealer number exempt from taxation. If the intention had been that the location of the buyer himself should be the criterion for imposing tax on him, the language used in the Rule would have been quite different. It companyld easily have been laid down that the tax will be levied from the dealer in the State who buys it as the last dealer number exempt from taxation. The expression as used in the Rule makes it perfectly clear that the location of the dealer himself is immaterial. The liability to be taxed attaches if the purchase itself by the dealer is within the State. In the case of the sales in question, therefore, the buyers who purchased the companyton bales from the respondents were the last dealers who bought those companyton bales in the State and the single point tax under S. 5 2 of the Act had to be levied from them and number from the respondents. In this companynection, an alternative argument was also raised for the first time by learned companynsel for the appellant that those 6Sup.C.I./66-12 outside buyers companyld number be held to be dealers carrying on the business of purchase in the State, and if they were number dealers, the purchases by them had to be ignored, so that the last buyers in the State would be the respondents, because their purchases would be the last purchases by dealers made when they acquired these companyton bales subsequently sold by them. This companytention was number raised at any earlier stage before the Tribunal or the High Court, and it is, therefore, number open to the appellant to urge it before this Court for the first time. In any case, it is clear that the outside buyers were all mills which were purchasing companyton bales for use in their manufacturing process and such purchases by them would amount to purchases of raw materials for their business.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeal No. 567 of 1964. Appeal by special leave from the judgment and decree dated June 22, 1961 of the Kerala High Court in A. S. No. 243 of 1955 M . R. Gokhale and A. G. Puddissery, for the appellants. Ram Reddy, K. P. Madhava Menon and A. V. V. Nair, for respondents Nos. 2 to 13. The Judgment of the Court was delivered by Bachawat, J. The question in this appeal is whether Ex. A-1 dated March 26, 1900 and Ex. B-1 dated March 27, 1900 were kanam-kuzhikanam transactions, or whether they created usu- fructuary mortgages. The appellants sued for redemption and recovery of the suit lands alleging that Exs. A-1 and B-1 created usufructuary mortgages. The respondents claimed that they were kanam-kuzhikanamdars and entitled to fixing of tenure under s. 21 read with s. 3 15 of the Malabar Tenancy Act, 1929 Madras Act 14 of 1930 . The trial Court upheld the respondents companyten- tion and dismissed the suit. On appeal, the Kerala High Court affirmed this decree. The appellants number appeal to this Court by special leave. During the pendency of this appeal, the Kerala Land Reforms Act, 1963 Act 1 of 1964 came into force. It is companymon case before us that the appeal must be disposed of in accordance with the provisions of Act 1 of 1964. In this appeal, the respondents claim that they are the holders of kanam-kuzhikanam within the meaning of s. 2 23 of this Act. Section 13 of Act 1 of 1964 gives to every tenant fixity of tenure in respect of his holding and forbids resumption of the holding except as provided in ss. 14 to 22. Section 2 is the definition section. By s. 2 57 , a tenant means any person who has paid or has agreed to pay rent or other companysideration for his being allowed by another to possess and enjoy the land of the latter and includes inter alia a kanam-kuzhikanamdar. Section 2 23 reads kanam-kuzhikanam means and includes a transfer by a landlord to another person of garden lands or of other lands or of both, with the fruit-bearing trees, if any standing thereon at the time of the transfer, for the enjoyment of those trees and for the purpose of planting such fruit-bearing trees thereon, the incidents of which transfer include- a a right in the transferee to hold the said lands liable for the companysideration paid by him or due to him which companysideration is called kanartham and b the liability of the transferor to pay to the transferee interest on the kanartham unless otherwise agreed to by the parties Provided that a usufructuary mortgage as de- fined in the Transfer of Property Act, 1882 Central Act 4 of 1882 , shall number be deemed to be a kanamkuzhikanam Exhibits A-1 and B-1 demised the suit lands together with the fruit-bearing companyonut, arecanut and jack trees standing thereon for a period of 24 years. The transfer was for the enjoyment of the lands with the standing trees and for the purpose of planting fruit-bearing trees thereon. The kanam amount or the kanartham under Ex. A-1 was. Rs. 5,000/- and under Ex. B-1 was Rs. 600/-. The transferees were entitled to appropriate the income of the lands in lieu of interest on the kanam amounts and to hold the lands even. after the expiry of 24 years until payment of the kanam amounts and the value of the trees planted by them. Thus, all the companyditions of kanam-kuzhikanam mentioned in the main part of s. 2 23 were satisfied. Nevertheless, in view of the proviso M15Sup.CI/66-7 to s. 2 23 , the transactions would number be kanam-kuzhikanam if it is shown that they were by way of usufructuary mortgages as defined in s. 58 d of the Transfer of Property Act, 1882. A kanamkuzhikanam and a usufructuary mortgage have many companymon features. Both the transactions involve or may involve transfer of possession on payment of money by the transferee, set-off of profits against interest and retention of possession until repayment of the money. In spite of their close resemblance, the essential distinction between the two types of transactions must number be overlooked. A kanam-kuzhikanam is a lease, and is, there- fore, a transfer of a right to enjoy the property. A mortgage is a transfer of an interest in the property for securing the repayment of a debt. The purpose of one is to enable enjoyment of the property by the transferee, that of the other is to secure the debt. On the question whether a transaction is a kanam-kuzhikanam or a usufructuary mortgage, the name given to it by the parties is a relevant, though number always a decisive, companysideration. If the parties described the transaction to be a kanam-kuzhikanam it is a valuable indication that they intended it to be such and number a usufructuary mortgage. If the document purports to be a mortgage, s. 12 of the Act allows the parties to prove that it is, in substance, a kanam-kuzhikanam or other lease. But if the document purports to be or is, on its true companystruction, a kanamkuzhikanam or other lease, s. 12 has numberapplication and full effect must be given to the document according to its tenor. Both Exs. A-1 and B-1 were styled kanam deeds. Exhibit A-1 stated that the demise was in Kettiyadakkam kanam right. Kottiadaki means took possession. The expression kettiyadakkam kanam may mean a usufructuary mortgage, but this, is number its necessary or invariable meaning. Exhibit B-1 explained Ex. A-1. Exhibit B-1 explicitly stated that the demises under Ex. A-1 and B-1 were in kanam-kuzhikanam right. Exhibits A-1 and B-1 read together show that both the transactions were kanam-kuzhikanam. The subsequent documents, Exs. B-2, B-5, B-8, B-9, and B-10 executed between 1921 and 1944 all recited that Exs A-1 and B-1 were kanam-kuzhikanam transactions. Exhibits A-1 and B-1 did number companytain any recital showing that they created security for repayment of a debt. Significantly, the parties did number describe the transactions to be a mortgage, otti, panayam or a kyvasam panayam. Instead, they described the transactions as kanam-kuzhikanam and the amounts paid to the transferees as kanartham. Exhibits A-1 and B-1 did number purport to be and were number transactions for securing debts. We agree with the Courts below that the transactions were kanamkuzhikanam and were number usufructuary mortgages. In the result, the appeal is dismissed with companyts.

Case appeal was rejected by the Supreme Court

CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 154, to 165 of 1966. Appeals by special leave from the judgment and order dated February 3, 1965 of the Andhra Pradesh High Court in Writ Appeals Nos. 117 to 128 of 1964. Ram Reddy and A. V. V. Nair, for the appellants in all the appeals . V. Gupte, Solicitor-General, R. Ganapathy Iyer and R. Sachthey, for respondent in all the appeals . The Judgment of the Court was delivered by Shah, J. M s. Kantamani Venkata Narayana Sons-hereinafter referred to as the assessee is a Hindu undivided family, which was assessed to tax on income derived principally from money--lending. In the companyrse of proceedings for assessment of a private limited companypany styled Motu Industries Ltd., the Incometax Officer, Rajahmundry discovered that there was a large accretion to the wealth of the assessee which had number been disclosed in proceedings for its assessment. On March 12, 1959, the Income-tax Officer issued a numberice seeking to reopen the assessment for the year 1950-51. The assessee filed a return under protest. On March 14, 1960 the Income-tax Officer issued numberice of re-assessment for the year 1951-52, and on December 19, 1960, the Income-tax Officer intimated the reasons that had prompted him to issue the numberices of re-assessment. On March 24, 1962 the Income- tax Officer issued numberices under s. 34 for re-assessment of income of the assessee for the years 1940-41 to 1949-50. The assessee then presented petitions in the High Court of Andhra Pradesh for writs of prohibition directing the Income-tax Officer to refrain from proceeding in pursuance of the numberices for the assessment years 1940-41 to 1949-50 and 1950-51 and 1951-52. A single Judge of the High Court rejected the petitions and the order was companyfirmed in appeal by a Division Bench of the High Court. The assessee has appealed with special leave. The numberice issued by the Income-tax Officer did number specifically refer to s. 34 1 a of the Income-tax Act it did number set out the clause under which it was issued. But on that account the proceeding under s 34 is -not vitiated. It was held by the Calcutta Sup.C.1.166-18 High Court in P. R. Mukherjee v. Commissioner of Income-tax West Bengal 1 , that it is number necessary or imperative that a numberice -under s. 34 must specify under which of the two clauses-cl. a an cl. b of sub-s. 1 of s. 34, the numberice is issued. The main numberice to be issued in a case under s. 34 is the numberice under s. 22 2 , and s. 34 merely authorises the issue of such a numberice. The proceedings for re-assessment companyer a period of 12 years 194041 to 1951-52. Section 34 of the Income-tax Act has under gone some changes during that period, but the basic scheme of the section has remained substantially the same. Power to re-assess income under s. 34 1 as amended by Act 7 of 1939 companyld be exercised if definite information had companye into the possession of the Income-tax Officer, and in companysequence of such information it was discovered that income chargeable to tax had escaped assessment By the Income-tax and Business Profits Tax Amendment Act 4 of 1948, s. 34 1 was recast to read as follows - If- a the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that year, or have been under- assessed, or assessed at too low a rate, or b numberwithstanding that there has been numberomission or failure as mentioned in clause a on the part of the assessee, the Income-tax Officer has in companysequence of information in his possession reason to believe that income, profits or gains chargeable to income-tax have escaped assessment for any year, or have been under-assessed, or assessed at too low a rate, he may in cases falling under clause a at any time and in cases falling under clause b at the time within four years of the end of that year, serve on the assessee, a numberice companytaining all or any of the -requirements which may be included in a numberice under sub-section 2 of section 22 and may proceed to assess or re-assess such income, profits or gains 1 30 I.T.R. 535. An Explanation was also added which states Explanation Production before the Income-tax Officer of account books or other evidence from which material facts companyld with due diligence have been discovered by the Income- tax Officer will number necessarily amount to disclosure within the meaning of this section. Since on the matter canvassed in these appeals there is numbermaterial change in the section, we will only refer to the section as amended by Act 48 of 1948. This Court in Calcutta Discount Company Ltd. v. Income-tax officer, Companies District 1 and Another 1 observed that before the Income-tax Officer may issue a numberice under s. 34 1 a of the Indian Income-tax Act, two companyditions precedent must companyexist the Income-tax Officer must have reason to believe 1 that income, profits or gains had been under-assessed, and 2 that such under assessment was due to number-disclosure of material facts by the assessee. The Court further held that where the Income-tax Officer has prima facie reasonable grounds for believing that there has been a number-disclosure of a primary material fact, that by itself gives him jurisdiction to issue a numberice under s. 34 of the Act, and the adequacy or otherwise of the grounds of such belief is number open to investigation by the Court. In a recent judgement of this Court in S. Narayanappa Others v. The Commissioner of Income-tax, Bangalore, 2 Ramaswami J., speaking for the Court observed . . . the legal position is that if there are in fact some reasonable grounds for the Income-tax Officer to believe that there had been any number-disclosure as regards any fact, which companyld have a material bearing on the question of under-assessment that would be sufficient to give jurisdiction to the Income- tax Officer to issue the numberice under s. 34. Whether these grounds are adequate or number is number a matter for the Court to investigate. In other words, the sufficiency of the grounds which induced the Income-tax Officer to act is number a justiciable issue. It is of companyrse open for the assessee to companytend that the Incometax Officer did number hold the belief that there had been such number-disclosure. In other words, the existence of the belief can be challenged by the assessee but number the sufficiency of the reasons for the belief. Again the expression treason to believe in section 34 of the Income-tax Act does number mean a purely subjective satisfaction on the part of the Income-tax Officer. The belief must be held in good 1 1961 2 S.C.R. 241. 2 1967 1 S.C. R. 596. faithit cannot be merely a pretence. To put it differently it is open to the Court to examine the question whether the reasons for the belief have a rational companynection or a relevant bearing to the formation of the belief and are number extraneous or irrelevant to the purpose of the section. To this limited extent, the action of the Income-tax Officer in starting proceedings under s. 34 of the Act is open to challenge in a companyrt of law. It is clear from the affidavits filed in the Court of First Up stance that the Income-tax Officer had received information relying upon which he had reason to believe that the assessee had number disclosed fully and truly all material facts necessary for the assessment and in companysequence of number-disclosure-of that information, income chargeable to tax had escaped assessment. In his affidavit, Income-tax Officer stated A scrutiny of the money-lending statements filed by the assessee for the years ended 31-3-50 and 31-3-51 revealed that there were large investments made by the assessee in his money-lending business in those two years. The assessee did number file balance sheets for the said two years, or for the earlier assessment years and companysequently it was number clear from the statements filed by him, how he companyld make heavy investments in money-lending business in those two years. The Income-tax Officer also stated that in the year of account 1949-50 the total investments in money-lending business had increased by Rs. 1,33,000/- and in the following year by Rs. 49,000/and the plea of the assessee that growth in the investments of the assessee in those years was mainly due to the cash balance he by the manager out of his share received on partition between his and his brothers, and cash gifts from his father-in-law which were till then kept uninvested even in the money-lending business, was number supported by any evidence, that the assessee had suppressed the account books for the periods prior to April 1, 1949, and that the assessee had number produced the deed of partition relied upon. According to the Income-tax Officer, the net wealth of the family ,on April 1, 1937, inclusive of investments in the money-lending business was less than Rs. 50,000/- and the investments made by the assessee in money-lending business were approximately of the ,order of Rs. 21,000/-, that the assessments made on the family from 1937-38 till 1948-49 showed that the assessees aggregate income for those years was Rs. 30,000/- , that taking into account the managers professional income and the agricultural income of the assessee, the aggregate companyld number exceed Rs. one lakh, and that possession of large wealth on April 1, 1949 which was number explained justified him in inferring that there was escapement assessment of huge income or in any event it had resulted in under-assessment on account of the failure of the assessee in number disclosing the material facts fully and truly for the assessment years 1940-41 to 1949-50. The averments made by the Income-tax Officer in his affidavit which have been accepted by the Court of First Instance, prima facie, establish that the Income-tax Officer had reason to believe that by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, income chargeable to income-tax has escaped assessment. It was urged on behalf of the assessee that year after year account books and statements of account were produced by the assessee before the Income-tax Officer, and the Income-tax Officer had companyputed to taxable income on the materials furnished, numbercase for exercising the power of the Income- tax Officer under s. 34 was made out, since power to re- assess may number be exercised merely because on the same evidence the Income-tax Officer or his successor entertains a different opinion. In our view there is numberforce in this companytention. From the affidavit of the Income-tax Officer it clearly appears that there had been companysiderable increase since 1938 in the investments in the money-lending transactions of the assessee and in the wealth of the assessee. The Income-tax Officer was number seeking to re- assess the income on a mere change of opinion. The increase in the wealth discovered was wholly disproportionate to the known sources of income of the assessee. That was prima facie evidence on which he had reason to believe that the assessee had omitted to disclose fully and truly all material facts and that in companysequence of such number- disclosure income had escaped assessment. The Income-tax Officer has said that numberattempt was made by the assessee to furnish some reasonable proof of the source of the addi- tional wealth the partition deed was number produced the books of account prior to 1948-49 were withheld on the plea that all the books were lost numberevidence was tendered to show that the fatherin-law of the manager was possessed of sufficient means to give and did give any large cash amounts to him and there was also numberexplanation why a large amount exceeding a lakh of rupees was number invested in the money- lending or other business. The Income-tax Officer had therefore prima facie reason to believe that information material to the assessment had been withheld, and that on account of withholding of that information income liable to tax had escaped assessment. From the mere production of the books of account it cannot be inferred that there had been full disclosure of the material facts necessary for the purpose of assessment. The terms of the Explanation are too plain to permit an argument being reasonably advanced, that the duty of the assessee to disclose fully and truly all material facts is discharged when he produces the books of account or other evidence which has a material bearing on the assessment. It is clearly implicit in the terms of ss. 23 and 34 of the Income-tax Act that the assessee is under a duty to disclose fully and truly material facts necessary for the assessment of the year, and that the duty is number discharged merely by the production of the books of accounts or other evidence. It is the duty of the assessee to bring to the numberice of the Income-tax Officer particular items in the books of account or portions of documents which are relevant. Even if it be assumed that from the books produced the Income-tax Officer, if he had been circumspect, companyld have found out the truth, the Income-tax Officer may number on that account be precluded from exercising the power to assess income which had escaped assessment. It was urged that since the High Court in appeal did number de- cide whether any primary facts on which the determination of the issue of reasonable belief in number-disclosure of material facts necessary for the assessment of the previous year and escapement of tax in companysequence thereof depended, were number disclosed, the judgment of the High Court should be set aside. The learned Trial Judge has dealt with in detail the affidavits of both the assessee and the In companye-tax Officer and has companye to the companyclusion that there was prima facie evidence of number-disclosure fully and truly of all material facts necessary for the assessment and on the materials placed before the Income-tax Officer he had reason to believe that as a companysequence of that number-disclosure income had escaped assessment. The High Court in appeal after referring to the judgment in Calcutta Discount Companys case observed without the enquiry being held by the companycerned Income-tax Officer it is number possible, on the material on record, to decide whether or number the assessee omitted to or failed to disclose fully and truly all material facts necessary for his assessment for the respective year.

Case appeal was rejected by the Supreme Court